
Book_^-4J3 



CONVERSATIONS 

BETWEEN THE 

CHINESE AND JAPANESE REPRESENT- 
ATIVES IN REGARD TO THE 
SHANTUNG QUESTION 



u 



TREATY FOR THE SETTLEMENT OF OUT- 
STANDING QUESTIONS RELATIVE TO 
SHANTUNG. 

AGREED TERMS OF UNDERSTANDING 
RECORDED IN THE MINUTES OF THE 
JAPANESE AND CHINESE DELEGATIONS 
CONCERNING THE CONCLUSION OF 
THE TREATY FOR THE SETTLEMENT 
OP OUTSTANDING QUESTIONS RELA- 
TIVE TO SHANTUNG. 



MINUTES PREPARED BY 

THE JAPANESE DELEGATION 



i 



^ ^^kM ^7 



WASHINGTON 

GOVERNMENT PRINTING OFFICE 

1922 



CONVERSATIONS 

BETWEEN THE 

CHINESE AND JAPANESE REPRESENT- 
ATIVES IN REGARD TO THE 
SHANTUNG QUESTION 



TREATY FOR THE SETTLEMENT OF OUT- 
STANDING QUESTIONS RELATIVE TO 
SHANTUNG. 

AGREED TERMS OF UNDERSTANDING 
RECORDED IN THE MINUTES OF THE 
JAPANESE AND CHINESE DELEGATIONS 
CONCERNING THE CONCLUSION OF 
THE TREATY FOR THE SETTLEMENT 
OF OUTSTANDING QUESTIONS RELA- 
TIVE TO SHANTUNG. 



MINUTES PREPARED BY 

THE JAPANESE DELEGATION 



WASHINGTON 
GOVERNMENT PRINTING OFFICE 

1922 



-jl^ 






RECEIVED 



CONTENTS. 



Minutes of the proceetlingg : 

First meeting, Dec. 1, 1921. 3 p. m , 

Second meeting, Dec. 2, 1921, 3.30 p. m_.. 

Tliird meeting, Dec. 5, 1921, 3.30 p. m 

Fourtli meeting, Dec. 6, 1921, 3.30 p. m 

Fifth meeting, Dec. 7> 1921, 3.15 p. m 

Sixth meeting, Deo. 8, 1921, 3.30 p. m , 

Seventh meeting, Dec. 9, 1921. 11 a. m 

EiglUh meeting, Dec. 9, 1921, 3 p. m 

Ninth meeting, Dec. 10, 1921, 3.15 p. jn 

Tenth meeting. Dec. 12, 1921, 3.15 p. m 

Eleventh meeting, Dec. 13, 1921, 3 p. m 

Twelfth meeting, Dec. 14, 1921, 3.15 p. m 

Tliirteenth meeting, Dec. 15, 1921, 3.15 p. ni 

Fourteenth meeting, Dec. 16, 1921, 2.30 p. m 

Fifteenth meeting, Dec. 17, 1921. 3 p. m 

Sixteenth meeting, Dec. 19, 1921. 3 p. m 

Seventeenth meeting, Dec. 20, 1921. 3 p. m 

Eigliteenth meeting, Jan. 4, 3922, 5 p. m 

Nineteenth meeting, Jan. 5, 1922, 5.30 p. m 

Twentieth meeting, Jan. 6, 1922, 3 p. m 

Twenty-first meeting. Jan. 11, 1922, 11 a. m 

Twenty-second meeting, Jan. 11, 1922, 4 p. m 

Twenty-third meeting, Jan. 12. 1922, 11 a. m 

Twenty-fourtli meeting. Jan. 12, 1922. 3 p. m 

Twenty-fifth meeting, Jan. 13, 1922, 11 a. m 

Twenty-sixth meeting, Jan. 14. 1922. 10.30 a. m 

Twenty-seventli meeting, Jan. 16, 1922, 10.30 a. m 

Twenty-eighth meeting, .Tan. 17, 1922, 10.30 a. m 

Twent.v-ninth meeting, Jan. IS, 1922, 4 p. m 

Thirtieth meeting, Jan. 19, 1922. 4 p. m 

Thirty-first meeting. Jan. 23, 1922, 3.30 p. m 

Thirt.v-second meeting, Jan. 24, 1922, 3.30 p. m 

Thirty-third meeting, Jan. 26, 1922. 4 p. m ^ 

Thirty-fourth meeting, Jan. 30, 1922, 3 p. m 

Thirty-fifth meeting, Jan. 31, 1922, 10 a. m 

Thirty-sixth meeting, Jan. 31, 1922, 5 p. m . 

Meetings of tlie drafting committee 

Treaty for settlement of outstanding questions relative to Shantung-. 

Agreed terms of understanding recorded in the minutes 

Index -_. 



Page. 

1-5 

6-15 

16-23 

23-31 

31-38 

39-44 

45-52 

52-63 

63-73 

73-84 

84-98 

98-109 

109-118 

118-133 

133-146 

147-159 

159-173 

173-188 

188-195 

196-208 

208-217 

217-230 

230-237 

237-251 

251-260 

260-272 

272-280 

280-292 

292-296 

296-304 

304-313 

313-321 

321-333 

333-360 

360-368 

368-382 

383 

384-391 

392-393 

395 



(in) 



MINUTES OF PEOCEEDINGS. 



FIRST MEETING. 

The first meeting, held in governing' board room, the Pan Ameri- 
can Union Building, Washington, D. C., at 3 o'clock in the afternoon 
of Thursday, December 1, 1921. 

PKESENT. 

China. — Dr. Sao-Ke Alfred Sze, Dr. V. K. Wellington Koo, Dr. 
Chung Hui Wang. Secretaries: Mr. Philip K. C. Tyau, Gen. Fu 
Huang, Mr. Tung-Fan Hsu, Mr. Chuen Chao, Mr. Yun Kuan Kuo. 

Japmi. — Baron T. Kato, Mr. M. Hanihara, Mr. K. Debuchi. Sec- 
retaries: Mr. S. Saburi, Mr. E. Kimura, Mr. H. Saito, Mr. T. 
Shiratori. 

Also present as observers: 

The United States of America. — Hon. Charles E. Hughes (part of 
the meeting) , Mr. John Van A. MacMurray, Mr. Edward Bell. 

The British Empire. — The Eight Hon. Arthur James Balfour, 
O. M., M. P. (part of the meeting), the Right Hon. Sir John Jordan, 
G. C. I. E., K. C. B., G. C. M. G. ; Mr. M. W. Lampson, M. V. O. 

OPENING REMARKS, 

Mr. Hughes said that he confidently hoped that a fair and mutually 
satisfactory settlement might result from the friendly conversations 
now to be undertaken by the representatives of Japan and China. 
He felt gratified that the suggestion he had made in conjunction with 
Mr. Balfour had been accepted by both Japan and China. He was 
convinced that questions of this sort could be speedily solved in no 
other way than by an interchange of views of this description. He 
entertained most earnest and confident hope that the free conversa- 
tions would be productive of good results. 

Mr. Balfour said that the sentiments expressed by Mr. Hughes 
entirely coincided with his own. He had full confidence that the 
representatives of the two powers would come to an agreement on 
the Shantung question, which was so important not only to the coun- 
tries immediately concerned but to the whole world. He joined Mr. 
Hughes in sajdng that in the course of the conversations, if any 
circumstances should come to pass which called for friendly inter- 
vention on his part, it would be his great pleasure to offer his services. 
He was in that connection entirely at the disposal of Mr. Hughes and 
the representatives of Japan and China. He understood that Mr. 
Hughes's idea was that the conversations should be conducted with- 
out their presence. 

(1) 



Baron Kato, speaking in Japanese, said : 

" We are sincerely gratified by the opportunity which has been 
afforded us to meet with the representatives of China in an attempt 
to arrive at a satisfactory adjustment of the Shantung question. 
We can not let this occasion pass without expressing our deep ap- 
preciation of the good offices of Secretary Hughes and Mr. Balfour, 
which have made the present meeting possible. 

" It is needless for us to assure you that Japan is eagerly looking 
forward to an early settlement of this long-pending controversy. 
We may add that it is the desire of the Japanese people to eliminate 
all cause for misunderstanding between China and Japan, in order 
that these two neighboring nations in the Far East may live in 
future in jDcrfect harmony and accord. And we have no doubt that 
this sentiment is fully shared by our Chinese friends. 

" We are not unmindful of the difficulties with which the Chinese 
Government is being confronted in entering into direct negotiations 
on the subject. We are, however, confident that, if approached from 
a broader jDerspective, the question should be susceptible of a speedy 
solution. The true and vital interests of the two nations are in no 
way conflicting. 

" It is unfortunate that the real issues involved have been very 
largely misunderstood in the popular mind. The term ' Shantung 
question,' is itself a misnomer. The question is not one which affects 
the whole Province of Shantung. The imi:)ortant points now await- 
ing adjustment relate onl}^ to the manner of restoring to China an 
area of territory, less than one-half of 1 per cent of the Shantung 
Province, and also to the disposition of a railway 290 miles long, 
and its appurtenant mines, formerly under exclusive possession and 
management of the Germans. There is absolutely no question of 
full territorial sovereignty being exercised by China throughout the 
length and breadth of the Province. 

" Careful examination of the correspondence recently exchanged 
between Japan and China will show that the divergencies of opinion 
between the two Governments are more apparent than real. We 
are hopeful that this meeting will be able to determine in common 
accord the essential terms of settlement, leaving the matters of de- 
tail or of local nature for arrangement by the commissioners of the 
two Governments to be specially aj^pointed for that purpose." 

Dr. Sze said that he desired to repeat on behalf of the Chinese 
delegation the deep appreciation of the good offices exerted by Mr. 
Hughes and Mr. Balfour, to which he had already given expression 
officially the day before in the full committee. The Chinese dele- 
gation came to this country with the hope of obtaining a speedy so- 
lution of all outstanding questions between China and other powers. 
Among the rest, the Shantung question stood out as one of most vital 
importance to China. The Chinese Government as well as the entire 
Chinese people wished for an early and just settlenaent of that ques- 
tion. It was highly desirable that through the kind assistance of 
the two gentlemen and the cooperation of the Japanese colleagues 
a satisfactory agreement should be reached. 

Mr. Hughes was gratified to receive assurances from both delega- 
tions that the conversations would be conducted in the most friendly 
manner. He was in full accord with Mr. Balfour in offering services 



whenever needed. He added that the physical facilities of the Pan 
American building were also at the disposal of the negotiators. 
(Mr. Hughes and Mr. Balfour left the meeting at this point.) 

PROCEDURE. 

-Baron Kato, speaking in Japanese, expressed his desire to have 
the conversations conducted in the most open and friendly manner, 
so that, without much formality, they could express freely their frank 
opinions. He then desired that a decision should be made as to the 
procedure of the meetings. However, being unable to speak in Eng- 
lish, he would intrust the task of carrying on the conversations to 
Mr. Hanihara. 

Mr. Hanihara repeated that the conversations should be carried on 
as informally as possible and desired that arrangements should now 
be made as to a few points of procedure. He suggested — 

(1) That no chairman or president be elected for the meetings 
in view of their very informal and friendly nature. 

(2) That it was deemed desirable that as much publicity as might 
be agreed upon should be given the deliberations of the meetings. 

(3) That minutes be kept by the secretaries of the proceedings of 
each session and be approved by the delegates at the next meeting. 

(4) That the date of the next meeting be decided upon each time. 

MINUTES. 

Dr. Sze declared that the Chinese delegation welcomed the oppor- 
tunity for free and frank talk. As to the matter of the communique, 
he thought that as much publicity as possible should be given in the 
press, so that no unnecessary misunderstanding might arise. As to 
the keeping of the minutes, he wondered whether it would not be best 
to trespass further upon the good offices of the gentlemen representing 
the United States and Great Britain. 

Mr. Hanihara said that that suggestion struck him as a very good 
one. If those gentlemen would be good enough to undertake that 
task, he suggested that the respective delegations each send a secretary 
to assist in the work. He asked what was the pleasure of the rep- 
resentatives of the United States and the British Empire in the 
matter. 

Mr. MacMurray said that he and his colleagues were keeping a 
record of the proceedings but they were really for their own use. He 
suggested tiiat it would perhaps be more appropriate that the minutes 
should be officially kept by the secretaries of the respective delega- 
tions. 

Mr. Hanihara said that in that case perhaps it would be best that 
each delegation appoint a secretary to prepare the minutes and have 
the representatives of the United States and the British Empire help 
them in completing them. 

The proposals of Mr. Hanihara were agreed to. 

SUBSTITUTION OF A PLENIPOTENTIARY. 

Baron Kato then stated that, on account of the work of other meet- 
ings, and, further, on account of the illness of Baron Shidehara, the 



Japanese delegation might find it difficult to send all their plenipoten- 
tiaries to this meeting. He would do his best to be present himself 
as often as possible, but it might so happen that a substitute would 
be sent in the place of a plenipotentiary. In a word, he suo^gested the 
adoption of the panel system. He supposed that such might be the 
case also with the Chinese delegation. In point of fact, Mr. Debuchi 
was present to-day in place of a plenipotentiary. 

Dr. Sze said that that was agreeable. 

Dr. Koo said that, without placing undue emphasis on the question 
of formality, he wanted to know clearly what was the authority of a 
substitute when he attended the meeting, whether he would possess 
the same authority as any plenipotentiary. 

Baron Kato, speaking in Japanese, answered that in case a sub- 
stitute took the place of a plenipotentiary he would have the powers 
to state the views of the Japanese delegation, but the responsibilities 
for the statements would be assumed entirely by those who were 
plenipotentiaries. 

DATE AND FEEQUENCT OF MEETING. 

Dr. Sze suggested that, it being desirable to have meetings as often 
as possible, they should meet every afternoon, because the mornings 
Avould be occupied with the meetings of the full committee. 

Mr. Hanihara suggested that, inasmuch as many other meetings 
would be held, and because the length of time to be required for the 
preparation would depend upon the nature of the subject niatter on 
the agenda of the following meeting, it would be best to decide upon 
the date of the following meeting at the end of each meeting. He 
entirely shared the views of Dr. Sze that the meetings should be held 
at frequently as possible. He then went on to ask whether the 
Chinese delegation was prepared to enter into the discussion of the 
question proper to-day. 

BASIS or DISCUSSION. 

Dr. Sze declared that they were willing to listen to whatever the 
Japanese delegates might be prepared to say, but they had, for their 
part, nothing prepared to present to the conference. 

After some discussions, it was decided that the conversations 
should be restricted to-day to the question of procedure. 

Mr. Hanihara said perhaps the conference could take the Japanese 
note, under the date of September 7, 1921, as the starting point of 
discussions at the next meeting. 

Dr. Koo stated that we could perhaps take the whole communica- 
tions exchanged between Japan and China relating to the Shantung 
question as the basis of discussion. 

Baron Kato expressed his approval. 

The meeting adjourned at 4.30 p. m. to meet again at 3.30 p. m. 
Friday, December 2, 1921. 

Then the form of the press communique was discussed. The 
Japanese delegates desired that the statement of Baron Kato should 
be incorporated in the communique, but Dr. Sze objected to this 
course on the ground that, owing to the incorporation in the state- 



ment of several points, such as those in relation to the term " Shan- 
tung question " and the mines appurtenant to the railway, on which 
the Chinese delegates desired to have their observations published 
at the same time, and for fear that misunderstandings might be 
caused by the publication of the Japanese statement by itself, the 
Chinese delegation would rather prefer that the publication of the 
statement should be deferred until to-morrow. Thereupon, after 
certain discussion, it was decided that the communique should be in 
the form annexed herewith (Annex I). 
It was decided : 

(1) That the meetings should be entirely informal. 

(2) That there should be no chairman or president for the meet- 
ings. 

(3) That as much publicity as possible should be given to the 
proceedings of the meetings. 

(4) That Mr. Hanihara and Dr. Koo should supervise the draft- 
ing of the press communique. 

(5) That the minutes should be made by the secretaries of the 
Japanese and Chinese delegations with the assistance of the repre- 
sentatives of the United States and the British Empire. 

(6) That a plenipotentiary may send a substitute. 

(7) That the whole communications exchanged between Japan 
and China in relation to the Shantung question should be made the 
basis of future discussions. 

(8) That the date of the following meeting should be decided 
upon at the end of each meeting. 

Japanese Delegation, 

Washifigton, D. C, December J, 1921. 

SJC-i.] . 

Annex I. 

December 1, 1921. 

[For the press.] 

Issued hy the Chinese and Japanese delegations. 

The conversations between the Chinese and Japanese delegates 
relating to the Shantung question, arranged through the good offices 
of Mr. Hughes and Mr. Balfour, commenced this afternoon at 3 
p. m. in the conference room of the Pan American Union Building. 

The meeting on the part of China was attended by Dr. Sze, Dr. 
Koo, and Dr. Wang, accompanied by Mr. Tyau, Gen. Wang, Mr. 
Hsu, Mr. Chao, and Mr. Kuo ; and on the part of Japan by Baron 
Kato, Mr. Hanihara, Mr. Debuchi, accompanied by Mr. Saburi, Mr. 
Kimura, Mr. Saito, and Mr. Shiratori. Mr. Hughes and Mr. Bal- 
four, accompanied by Sir John Jordan, Mr. Miles Lampson, Mr. 
J. V. A. MacMurra}^ and Mr. Edward Bell, opened the meeting and 
retired, leaving the above-named American and British representa- 
tives to assist at the sessions. 

The meeting discussed questions of procedure and decided to issue 
a communique at the end of each meeting. The next meeting will be 
held in the same building at 3.30 p. m., Friday afternoon next. 



SECOND MEETING. 

The second meeting, held in governing board room, the Pan Ameri- 
can Union Building,^ Washington. D. C, at 3.80 o'clock in the after- 
noon of Friday, December 2, 1921. 

PRESENT. 

China.— Dv. Sao-Ke Alfred Sze, Dr. V. K. Wellington Koo, Dr. 
Chung Hui Wang. Secretaries: Mr. Philip K. C. Tyau, Gen. Fu 
Huang, Mr. Tung-Fan Hsu, Mr. Chuan Chao, Mr. Telly Howard 
Koo. 

Japan.— Fv'mve I. Tokuga^Ya, Mr. M. Hanihara,. Mr. K. Debuchi,. 
Secretaries: Mr. S. Saburi, Mr. E. Kimura, Mr. H. Saito, Mr. T. 
Shiratori. 

Also present as observers : 

The United f^ fates of America. — Mr. John Van A. MacMurray, 
Mr. Edward Bell. 

The British Empire. — The Right Hon. Sir John Jordan, G. C. I. F^,, 
K. C. B., G. C. M. G. ; Mr. M. W. Lampson, M. V. O. 

PRESENCE OF FRENCH OBSERVERS. 

Dr. Sze said that before entering upon the conversations he wanted 
to ask the opinion of the Japanese delegation about the proposal 
which the Chinese delegation had received from the French delega- 
tion for having two French observers along wath the British and 
American observers. He wished, wath the consent of the Japanese 
.delegation, to reply that the French request would be acceded to with 
pleasure. 

Mr. Hanihara replied that although he and his colleagues had no 
special objection to the French suggestion, yet in this matter of in- 
formal conversations with the Chinese delegation they had had to 
obtain specific authorization from the Japanese Government; and 
that, moreover, it seemed to them to be proper that the pleasure of 
Messrs. Hughes and Balfour should be consulted in this matter. They 
did not, therefore, feel at liberty to make a reply either way at once. 

BASIS OF DISCUSSION. 

Dr. Koo said that yesterday his colleague. Dr. Sze, had expressed, 
in a general way, the desire of the Chinese delegation to cooperate 
with the Japanese delegation to the end that a speedy and just solu- 
tion of the Shantung question might be arrived at. The statement 
he wished to make now was about the difficulty of the position of the 
Chinese Government in entering upon these conversations, and there- 
fore the desirability of avoiding anything that might w^arrant the in- 
ference that, in agreeing to enter into the conversations, the Chinese 
Government had changed its attitude in regard to any of the treaties 
between China and Japan, as well as treaties between other Govern- 
ments. It would be best, for the purpose of facilitating the progress 
of these conversations, to forestall the chance of any such inference 
being drawn. Yesterday they had agreed that the whole corre- 
spondence exchanged between China and Japan on this question 



of Shantung should be made the basis of discussion. Now, the Chi- 
nese delegation was ready to listen to any observation that the Japa- 
nese delegation might see fit to make, the more so since the Chinese 
Government had received no response to their last note of Novem- 
ber 4. 

Mr. Hanihara stated that the proposals of the Japanese Govern- 
ment in regard to the Shantung question had been made in a most 
concrete and clean-cut way. The Japanese delegation had also caused 
a paper to be made in which the rights formerly held by Germany 
in Shantung, the position of Japan after the peace conference of 1919, 
and the proposals contained in her latest communication to China, 
made on September 7 last, were all set forth in clear contrast (i^n- 
nex I) . It was now his desire that a concrete exposition of the Chi- 
nese position in this matter should be made, so that these several 
questions concerning Shantung might be taken up one by one. 

Dr. Koo said in reply that the attitude of the Chinese Government 
in this matter had been stated in their note of October 5, and had 
further been clarified in their second note of November 4. The 
Chinese delegation had hoped, and they still hoped, that the ques- 
tion of Shantung might be settled along the lines of those notes. 
They would be glad if their Japanese colleagues would make any sug- 
gestion for any way of bringing their views closer together. He 
might add, however, that the easiest and simplest way w^ould be to 
disengage their niinds from the complicated state of affairs created 
by the difference of views with regard to the various treaties which 
concerned China. He thought it was very necessary for the success 
of their conversations to confine their discussions mainly to facts as 
they were. 

Mr. Hanihara stated in reply that he quite agreed. He had no 
desire to open academic questions. They would take as a basis of 
their discussion facts as they were. He thought it was best to take 
up concrete questions, item by item, and he was ready to enter into 
the deliberations of any question the Chinese colleagues liked. 

Dr. Sze said that if the Japanese note of September 7 was taken 
as the basis of discussion, then the Chinese delegation would have to 
revert to the Chinese note of October 5, and they would thus be going 
round in a circle. The logical thing Avould be for Japan to make 
some new proposal as the next step. 

Mr. Hanihara stated that he was not at all insisting upon making 
the Japanese note of September 7 the basis of discussion. His idea 
was that some concrete problems should be made the subject of de- 
liberation. Otherwise they would not know where to start, and he 
thought that the Japanese note of September 7 and the Chinese note 
of October 5 contained items which could be conveniently made the 
subject of consideration. 

Dr. Sze said that he agreed. 

Mr. Hanihara suggested that perhaps they could take a certain 
item in the Japanese note and see whether they could come to any 
agreement on that particular point, and if they did, they might 
regard it as a provisional decision or agreement ad referendum and 
thus go on through all the items enumerated. 



Dr. Sze said that that was agreeable, but he desired to point out 
that certain important questions were not mentioned in the Japanese 
note. One of them was the question of the salt field. There existed 
in China a salt monopoly. The revenue from the salt Gabelle had 
been assigned as security of several loans, in some of which Japanese 
l)ankers were also interested. 

Mr. Hanihara assured the Chinese delegation that he did not hesi- 
tate to take up any subject but suggested that, as it might be neces- 
sary to make preparations in advance, it would be best to decide each 
time upon the subjects that should come up for discussion at each 
next meeting. 

ITEM 1 OF THE JAPANESE NOTE OF SEPTEMBER 7. 

Dr. Koo stated they should have some starting point; so he would 
l)egin Avith the first item of the Japanese note of September 7. He 
wanted to know whether the Japanese delegation desired to make 
any observation regarding that subject. 

Mr. Hanihara tliought that, inasmuch as they had decided to dis- 
cuss concrete problems, perhaps some other item might more ap- 
propriately be taken up first. The subject matter of the item sug- 
gested by Dr. Koo had relation to the treaty of Versailles. 

Dr. Koo observed that he had no desire at all to be understood as 
if lie tried to draw into discussion the question of the interpretation 
as to the various treaties in dispute. Then he asked which item Mr. 
Hanihara desired to take up. 

Mr. Hanihara signified his willingness to take up any other item 
and suggested that the second or third be made the subject of 
discussion. 

Dr. Koo thought item 3, Avhich referred to the question of the 
railway, represented one of the most difficult phases of the Shan- 
tung question. He Avondered whether it was the intention of Mr. 
Hanihara to discuss it noAV or later. 

Mr. Hanihara stated that he had no special choice, but perhaps 
it would be best to take up first such subject as would be susceptible 
of easy solution. 

KATLW^AY. 

Dr. Sze said that he was very optimistic in coming to the meet- 
ing. It was stated to be the desire and determination of the 
Japanese delegation to cooperate with the Chinese delegation for 
a solution of the Shantung question. That sentiment was recipro- 
cated, and he was hopeful of speedy and fruitful results even as 
to the difficult question of the railway. 

Mr. Hanihara agreed that the question of the railway should be 
made the subject of discussion. He added that as he was not pre- 
pared to discuss the detailed features of that question, he preferred 
that the discussion should be of a general nature. 

Dr. Koo observed that he felt certain that he was not exaggerat- 
ing when he said that the question of Shantung Railway was one 



9 

to which the Government and people of China attached the great- 
est importance. Japan had proposed that the Shantung Railway 
should be made into a joint Sino-Japanese enterprise. He and his 
colleagues appreciated the desire on the part of the Japanese Gov- 
ernment to promote the Japanese and Chinese cooperation in re- 
gard to economic enterprises in China. The idea of joint enterprise 
in general was not objectionable on theoretical grounds, but, con- 
fining themselves to this particular question in hand, the Chinese 
Government could not see their way to accept the principle of joint 
enterprise. The Chinese delegates hoped that the Japanese col- 
leagues would, in view of the particular interest attached to the 
railway by the Chinese Government and people, accept the Chinese 
viewpoint in this question. If this railway were to be handed back 
to China and were to be administered as a Chinese Government 
railway, it was understood that the restitution would, of course, be 
effected subject to the condition proposed by the Chinese Govern- 
ment in their note of November 4; namely, the Chinese Government 
would be prepared to redeem or purchase half of the total amount 
of the valuation of the railway and its appurtenances. He could 
not but strongly emphasize the desirability of arriving at a solu- 
tion of the question on that basis because that would go a long way 
to remove the misunderstanding and misgivings which were enter- 
tained by the whole Chinese nation. By accepting this proposal, 
he felt certain Japan would not only not lose any substantial ad- 
vantage, but, in the long run, would have a great deal to gain, be- 
cause Japan and China had many interests in common and so much 
to do with each other. In urging this formula he recalled Baron 
Kato's wise and far-sighted remark, made j^esterday, that the Shan- 
tung question should be approached from a broad perspective. 

Mr. Hanihara stated that as to the Kiaochow-Tsinanfu Railway 
Japan's proposition was to make it a joint Sino-Japanese enter- 
prise. Having heard Dr. Koo's observations, he desired to state the 
position of the Japanese Government for making that proposition. 
To do so, he had to go back into the history of the question, not 
that he desired to open up any useless discussion, but just to make an 
exposition of what Japan regarded as a very generous proposition. 

In 1918 the Chinese Government approached Japan with request 
for a loan of 20,000,000 yen. As conditions of that loan it was 
agreed that Japanese capitalists should be permitted to finance cer- 
tain extensions of the Kiaochow-Tsinanfu Railway, which China 
proposed to construct at once. At the same time the Chinese Gov- 
ernment urged that Japan would make a concession in favor of 
China by undertaking that the Kiaochow-Tsinanfu Railway should 
be turned over to a joint Sino-Japanese enterprise. By the ar- 
rangement of 1915 China had already agreed to approve any disposi- 
tion which Japan might eventually make with Germany on the 
subject of the German rights in Shantung, including those relating 
to the Kiaochow-Tsinanfu Railway. It was, therefore, in an entirely 
liberal spirit on the part of Japan that she consented to yield to 
China a half share and half interest in that railway. The loan 



10 

requested by China was then concluded on those conditions, and the 
money was immediately paid to the Chinese Government. 

It would thus be seen that the plan of a joint Sino- Japanese 
enterprise of the Kiaochow-Tsinanfu Railway was due to the initia- 
tive of the Chinese (lovernment and had definitely been agreed upon 
as a condition of the loan concluded in 1918, 

It now appeared that the Chinese Government proposed .to repu- 
diate its commitment on this point on the ground that the plan in 
question was objected to by the entire Chinese people. It did not 
seem to be quite fair that a party to an agreement, after having 
received benefits of that agreement, should refuse to be bound an}' 
longer by the terms of the same agreement. There was something 
more involved in the issues than a question of legal technicality. 

The Japanese delegation trusted that if the whole facts were made 
known the Chinese people would be quick to appreciate the justice 
of Japan's position. The railway was formerly an exclusive Ger- 
man property in which China had no share or interest. It came 
into possession of Japan after considerable sacrifices in men and 
treasure, and she now proposed to turn it over to a joint Sino- 
Japanese enterprise in which the tAvo parties were to stand on a fair 
and equal footing. It was realized that public opinion in China 
should not be disregarded in the adjustment of the question, but it 
w^ould equally be realized that public opinion in Japan should also 
be weighed and considered. Japan believed that in making the 
present proposal she had gone more than halfway to meet China's 
standpoint. She hoped that she would be met by China in the same 
spirit of mutual accommodation. 

Dr. Koo said that without, of course, the slightest intention to 
avoid the discussion of any phase of the subject, he would urge upon 
his Japanese colleagues that it would simplify their conversation and 
would contribute to a speedy agreement, if they could leave the 
question of the treaty and notes of 1915 and 1918 aside from their 
conversations. He need hardly point out that it was those documents 
that had caused great anxiety and that had been a most fruitful 
cause of suspicion, distrust, and misapprehension on the part of the 
Chinese people. Nor were the feelings of the Chinese people at 
this moment by any means reassuring. He would therefore urge 
upon his Japanese colleagues to view the question from the point 
of view of the actual situation and try to work out a solution satis- 
factory to both parties. The facts relating to the negotiations of 
1915 and the circumstances under which the treaties and the supple- 
mentary notes were signed were by no means withheld from the 
knowledge of the public either in China or elsewhere. It was that 
knowledge which was responsible for the profound feeling of anxiety 
and disquietude of the Chinese people and also for the bad feeling 
between the Japanese and the Chinese nations. He would, therefore, 
urge that this question should be approached from the point of 
view of the greater interest of the friendly neighborhood and good 
understanding between the two countries. So far as the moneys 
advanced were concerned, he did not wish to digress into the political 
situation at the time when they were lent and the manner in which 



11 

they were used. Any advance of moneys that had been made woidd 
be fnlly refunded. Moreover, the private interests legitimately 
established and the vested rights properly acquired would naturally 
be safeguarded and protected. The Chinese Government would 
assure the Japanese Government about the refunding of the moneys 
and urge them to consider the question at issue in the spirit of the 
farsighted remarks of Baron Kato the day before. 

Mr. Hanihara stated that the Japanese proposal of the joint 
undertaking was for Japan's part going more than halfway. They 
had gone so far only because they desired to promote friendship and 
common interests between the two powers. If there were difficulties 
in China on account of public opinion, Japan had the same difficulties 
at home, leaving for the moment from consideration the question of 
the rights or wrongs of the case. The Japanese people believed 
that the railway in question had been rightfully acquired and would 
not understand why it should be given up. Japan valued the 
friendship of China and so she had offered as much as possible in 
this question. Her people would say that China had insisted from 
the outset that the railway should be returned to China and had 
shown no disposition whatever to come a step forward. It would 
not be fair that Japan should be the only party to go forward and 
make concessions. 

Dr. Sze remarked that he had had experiences with several rail- 
ways in China and had once been the heacl of the Chinese Ministry of 
Communications. He desired to say, therefore, one word from his 
experience. From the point of view of the advantage, not only to 
China and Japan, but also to the commerce of all the powers, it 
would be most desirable that China should develop a unified system 
of management and operation of the Chinese railways. The ad- 
vantages were very manifest. Under the present system it was 
necessary to make arrangement for the connection of the Kiaochow- 
Tsinanfu Railway and the next adjacent railway each time the 
goods were shipped. All such complications would be done away 
with by the adoption of the unified system. Japan would benefit, 
as well as China. In fact, Japan had already come halfway. Why 
would she not reach the goal. That would not only add much to the 
facilities of communi,cation, but would bring about in a general 
Avay great improvement of the relations between the two countries. 
There were misgivings in China, and the feeling toward Japan was 
not at its best, but he hoped all such obstacles to good, friendly re- 
lations would be removed. He thought that the time was most 
opportune ; that the benefits to be derived from the action of Japan 
would far outbalance any losses that might be involved. China was 
not selfish in this proposition, although he would admit that she 
would be the first to be benefited. The unified system had already 
proven to be of great advantage in certain parts of the country ; for 
instance, in Kwantung Province. He was very proud to state that 
the results attained in Kwantung had been praised by a judicial 
association in New York some time ago. In view of those great 
benefits to be derived from the unified system, he was sure that the 
public of Japan would be reconciled. 



12 

Mr. Hanihara remarked that the people of Japan woukl not look 
at the question in that light. They would think that the delegates of 
Japan merely knew how to meet the Chinese wishes. He did not 
think that much progress would be made in thus exchanging gen- 
eral observations upon this most difficult question in regard to 
Shantung. He thought it might be better to hold the subject in 
abeyance for some time and take up easier questions to avoid a dead- 
lock from the start. As it was not desirable to hamper the progress 
of the conversations and frustrate their purpose, he suggested that 
some easier matter might be made the subject of discussion. 

Dr. Koo said that he had no objection to proceed to some other 
question and come back to the railway at some later meeting. But 
he desired to say a word or two in relation to the statement made by 
Mr. Hanihara to the effect that the Shantung Eailway had been right- 
fully acquired by Japan. It was difficult for him to understand how 
a power could rightfully acquire a property belonging to another 
power which was situated in the land of a friendly country without 
the consent of that friendly country. He also wished to add, prosaic 
as might be the statement, that a joint enterprise was a thing which 
would not work satisfactorily unless the two parties to it were com- 
ing together in a spirit of willingness and accord. It was some- 
thing like the matrimonial contract which would not be a success if 
the contracting parties Avere forced into it. Therefore it Avas hoped 
that the idea of the joint enterprise would not be insisted upon. 
However, leaving the question of the railway for the present, he was 
quite prepared to take up any other subject. 

AGENDA. 

At the suggestion of Dr. Sze, the agenda for the next meeting was 
decided as follows: 

1. The customs administration (item 6, Japanese note September 
7, 1921). 

2. The foreign settlement and the opening of ports and cities (item 
2, Japanese note September T, 1921). 

3. Public property (item 7, Japanese note September 7, 1921). 
The press communique was decided upon in the form annexed 

(Annex II). 

The meeting adjourned 5.30 p. m. until 3.80 p. m. Monday, De- 
cember 5, 1921. 

It was decided: 

1. That the question of the admission of French observers be de- 
cided after consultation with Messrs. Hughes and Balfour and after 
consultation on the part of the Japanese delegates with their Gov- 
ernment. 

2. That the question of the railway be discussed at some later 
meetings. 

3. That the agenda for the next meeting be the items 6, 2, and 7 of 
the Japanese note of September 7, 1921. 

Washington, D. C, Decemher 2, 1921. 



13 

Annex I. 

Comparison of rights enjoyed by Germans and the Japanese proposals in 1919 and 1921. 
I. The Leasehold of Kiaochow and the Rights as to the Neutral Zone. 



Rights enjoyed by Ger- 
many. 



Japan's position after the 
peace conference at Paris 
in 1919. 



Japanese proposals to China 
on Sept. 7, 1921. 



(a)|The administrative 
rights in the leased terri- 
tory were entirely in the 
hands of the Germans. 

(6) Around the leased 
teiTitory Germany estab- 
lished a neutral zone of 50 
kilometers radius with ap- 
purtenant rights. 



(c) Part of the Bay of 
Kiaochow was used as a 
naval port and strong forti- 
fications were erected. 



(a) The leasehold and 
the rights in relation to the 
neutral zone to be restored 
to China. 

(6) Japan to establish an 
exclusive Japanese settle- 
ment in a part of the city 
of Tsingtau. (The Japan- 
ese Minister for Foreign 
Affair's declared on August 
2, 1919, that Japan had in 
contemplation proposals 
for the reestablishment in 
Tsingtau of a general for- 
eign settlement instead of 
the exclusive Japanese 
settlement.) 



(c) The whole Bay of 
Kiaochow to be opened as 
a commercial port. 



(a) The leasehold and the 
rights in relation to the neu- 
tral zone to be restored to 
China. 

(6) Japan to abandon plans 
for the establishment of a 
Japanese exclusive settle- 
ment or of an international 
settlement, provided that 
China engages to open, of its 
own accord, the entire leased 
territory of Kiaochow as a 
port of trade and to perntiit 
the nationals of all foreign 
countries freely to reside and 
to carry on commerce, indus- 
try, and agriculture or any 
other lawful pursuits within 
such territory, and that she 
further undertakes to respect 
the vested rights of all for- 
eigners. 

(c) The whole Bay of 
Kiaochow to be opened as a 
commercial port. 

{d) China to carry out 
forthwith the opening of 
suitable cities and towns 
within Shantung for resi- 
dence and trade of the na- 
tionals of all foreign coun- 
tries. 

(e) Regulations for the 
opening of places [mentioned 
in the foregoing items to be 
determined by China upon 
consultation with the powers 
interested. 



II. Rights Relative to the Railways. 

(1) SHANTUNG BAIL WAY. 



(a) Management and or- 
ganization: 

The railway was con- 
structed by a German 
company on the strength 
of a license issued by the 
German Government, 
which had obtained full 
concession for the railway 
from the Chinese Govern- 
ment. 

93042—22 2 



(a) To make it a joint 
Sino-Japanese enterprise 
in point of capital and 
management, both in 
name and fact. 



(fl) To make it a joint Sino- 
Japanese enterprise in point 
of capital and management 
both in name and fact. 



14 



Comparison of rights enjoyed by Germans and the Japanese proposals in 1919 and 1921. — 

Continued. 

I. The Leasehold of Kiaochow and the Rights as to the Neutral Zone. 



Rights enjoyed by Ger- 
many. 



{b) Policing of the rail- 
way: 

The police power be- 
longed to China but the 
whole police force was un- 
der the actual control of 
the German adviser. 



(c) The mines appurte- 
nant to the railway were 
under practically exclu- 
sive German management. 



Japan's position after the 
peace conference at Paris 
in 1919. 



(6) China to organize 
the police force and Japa- 
nese instructors to be ap- 
pointed on the recommen- 
dation of the directors of 
the railway. 



(c) These mines also to 
be worked as a joint Sino- 
Japanese enterprise. 



Japanese proposals to China 
on Sept. 7, 1921. 



(b) Japan to make special 
arrangement with China as to 
the organization of the special 
police to safeguard the rail- 
way. Japan to withdraw 
her troops along the railway 
as soon as she receives the 
announcement from the Chi- 
nese Government that such 
police force has been organ- 
ized. 

(c) These mines also to be 
worked as a joint Sino-Japa- 
nese enterprise. 



(2) othek railways. 



The options relative to 
the Kaomi-Hsuchow Rail- 
way and the Tsinan-Shun- 
teh Railway, and also the 
options relative to the 
Yentai-Weihsien and 
Kaipin-Yenchow Rail- 
ways Avere held by the 
Germans. 



Japan to succeed to the 
German rights. 



Rights relating to the ex- 
tension of the Kiaochow-Tsin- 
anfu Railway as well as op- 
tions for the construction of 
the Yentai-Weihsien Rail- 
way to be thrown open for the 
common activity of the In- 
ternational Financial Con- 
sortium in China. 



III. Options in Regard to the Supply of Men, Capital, or Material. 



Germany enjoyed such 
options. 



Japan to succeed to the 
German rights. 




IV. The Customs House at Tsingtao. 



The customs house at 
Tsingtao belonged to the 
general customs system of 
China, but several privi- 
leges were given to Ger- 
many. 



Japan to succeed to all 
German rights and pnAd- 
leges except those which 
are concomitant to lease- 
hold.. 



The status of the customs 
house as forming an integral 
part of the general customs 
system of China to be made 
clearer than under the Ger- 



man regime. 



V. The German Public Property Within the Leased Territory. 



It belonged to the Ger- 
man Government. 



Japan to succeed to the 
German ownership and the 
arrangements for its final 
disposal to be made be- 
tween Japan and China. 



Public property used for 
administrative purposes to 
be in general transferred to 
China, it being understood 
that the maintenance and 
operation of the public works 
and establishment shall be 
previously arranged between 
Japan and China. 



15 

SJC-2.] 



Annex II. * 



[For the press.] 



December 2, 1921. 



At the first meeting of the Chinese and Japanese delegates held 
yesterday in the Pan American Union Building, relative to the ques- 
tion of Shantung and in response to the opening remarks of Mr. 
Hughes and Mr. Balfour expressing their gratification in the ac- 
ceptance on the part of China and Japan of their good offices and 
their desire to extend their friendly intervention with a view to se- 
cure a fair and satisfactory arrangement of this question, Baron Kato 
and Dr. Sze replied as follows: 

Baron Kato, (Text the same as quoted in the minutes of the first 
meeting. ) 

Dr. Sze. I desire first of all to express on behalf of the Chinese 
delegation the sincere thanks and appreciation for the friendly and 
good offices that you two gentlemen have offered on behalf of your 
tAvo countries in bringing about conversations with a view to a fair 
settlement of the Shantung question. I need not add anything more 
to what I said yesterday at the general meeting of the full committee. 

The Shantung question is one of vital importance to China. Its 
importance to China and the difficulties connected therewith are too 
well know^n to all to need any remarks by me to-day. It is uni- 
versally admitted that the condition is unsatisfactory and that an 
early and speed}^ solution^r fair and just and satisfactory to the de- 
sires and aspirations of the Chinese people, is necessary. 

I join with you all in the hope that our conversations will be fruit- 
ful of results, resulting in a fair and just settlement. 

With reference to the observation of Baron^ Kato that the Japanese 
Government was not unmindful of the difficulties which have con- 
fronted the Chinese Government in regard to the method of settling 
this question, the Chinese delegation is gratified that these difficulties 
have been perceived by the Japanese delegation — difficulties which 
have made necessary the resort to the present procedure which, under 
the good offices of Mr. Hughes and Mr. Baliour in behalf of their 
respective Governments, has been initiated. 

The conversation was resumed at 3.30 this afternoon together with 
the American and British representatives. Prince Tokugawa re- 
placed Baron Kato in representing Japan at this session. 

It was agreed on the part of the two delegations that, in discussing 
the Shantung question, they would take the actual facts and not the 
academic viewpoints as the basis of discussions, which will be for the 
sole purpose of promoting mutual understanding and good neighbor- 
hood between China and Japan and without giving ground for the 
least inference that the discussions will be based upon the treaty ar- 
rangements which had been in dispute between these two countries or 
others. 

An interchange of views on the question of Kiaochow-Tsinanfu 
Railway then took place and this discussion will be continued at an- 
other meeting. 

The next meeting will be held at 3.30 Monday afternoon. 



16 

THIRD MEETING. 

The third meeting, held in governing board room, the Pan Ameri- 
can Union Building, Washington, D. C, at 3.30 in the after- 
noon of Monday, December 5, 1921. 

PRESENT. 

China. — Dr. Sao-Ke Alfred Sze, Dr. V. K. Wellington Koo, Dr. 
Chung Hui Wang. Secretaries: Mr. Philip K. C. Tyau, Gen. Fu 
Huang, Mr. Tung-Fan Hsu, Mr. Chuan-Chao, Mr. Telly HoM^ard 
Koo. 

Jaqmn. — Prince I. Tokugawa, Mr. M. Hanihara, Mr. K. Debuchi. 
Secretaries: Mr. S. Saburi, Mr. E. Kimura, Mr. H. Saito, Mr. T. 
Shiratori. 

Also present as observers: 

The united States of America. — Mr. John Van A. MacMurray, 
Mr. Edward Bell. 

The British Empire.— The Eight Hon. Sir John Jordan, G. C. I. E., 
K. C. B., G. C. M. G. ; Mr. M. W. Lampson, M. V. O. 

CUSTOMS. 

Mr. Hanihara said that the meeting was to take up the question 
of customs to-day. Before that, however, he wanted to call atten- 
tion to item 4 of the Japanese memorandum of September 7, in which 
it was declared that Japan would renounce all rights with regard 
to foreign assistance in persons, capital, and material stipulated in 
the Sino-German treaty of March 6, 1898. 

He then desired to point out that the maritime customs house at 
Tsingtao under the German regime had had several unique features 
in contrast with other customs offices in China, in accordance with 
the Sino-German agreements of 1889 and 1895. Among them, the 
following features might be mentioned: 

{a) Members of the European or foreign staff should, as a rule, 
be of German nationality. 

/ (5) The German language should be made the ruling official lan- 
guage in the customs office. 

y- (c) Certain articles should be duty free; for instance, articles for 
/use by German troops, machinery and similar articles for use in the 
< leased territory, etc. 

{d) The establishment of the free area. 

{e) The payment to the German Government of a certain pro- 



k" 



ortion of the iniport duties. 

The Japanese Government now proposed to make the customs at 
Tsingtao an integral part of the general customs system of China, 
simultaneously with the restitution of the leased territory. 

It was, however, hoped that China would be willing to extend 
facilities in the matter of language to the Japanese traders who had 
no command either of Chinese or English, and therefore it was 
desired : 

{a) That Japanese should be recognized as one of the official lan- 
guages for the Tsingtao customs in the same manner as Chinese or 
English. 



.5r"" 



17 



(h) That the same considerations should govern the selection of 
the personnel of the Tsingtao customs; in other words, that a suffi- 
cient numbr of officials versed in the Japanese language should be 
appointed. 

Dr. Sze said that China desired to have a customs system uniform 
at all places. It would be very difficult to allow a certain language 
to be recognized as one of the official languages at a certain customs 
office and to deny the same practice at other places. If the Japanese 
language was to be so recognized at Tsingtao, others might desire 
some other language to be so treated and there would be no end — 
even the Czecho-Slovaks might come out and demand a like privi- 
lege. It was impossible for China to adopt a third official language 
at any of her customs offices. It would be very cumbersome if all 
notices and instructions had to be written in three languages — 
Chinese, English, and Japanese. There were a great number of 
French people who were engaged in trade in China, but they had 
never asked for such a privilege. The Chinese Government could 
pledge themselves to give eYery facility to the Japanese traders at 
the customs at Tsingtao. Moreover, there was much similarity be- 
tween the Japanese and Chinese languages, so that he did not think 
it would take long for the Japanese to learn Chinese. 

Mr. Hanihara observed that special consideration should be given 
to the Japanese trade, which represented an overwhelming portion 
of the trade of Tsingtao, as figures in his hand showed. He did not 
think that the Japanese proposal was at all unreasonable. He was 
not asking for the privileges enjoyed by the Germans under their 
regime, but Avas only desiring the Chinese Government to recognize 
the conditions actually prevailing in Tsingtao. 

Dr. Sze stated that for the past few years the conditions in Tsing- 
tao had been exceptional and abnormal. Under ordinary conditions 
there would be clecidedly more trade carried on by British and 
American merchants. Nothing was farther from his thought than 
to intimate that he wanted to discourage the Japanese trade, but he 
did not consider that the figures for the last two years could be made 
the basis of a special claim. 

Mr. Hanihara said that it was of course very difficult to talk about 
the future, but if the present conditions could point to anything it 
might be safely forecast that the Japanese trade in Tsingtao would 
steadil}^ increase. 

Dr. Sze repeated that the Chinese Government would be ready to 
recommend the Inspector General of the maritime customs to afford 
facilities to the Japanese traders. His sole intention was not to 
encumber the task of the customs office. He would cite the cases of 
other Chinese ports, such as Hangkow, where a great number of 
Japanese were engaged in trade, but where only the English and 
Chinese languages were used. 

Mr. Hanihara repeated his observation that the actual situation 
should be taken into consideration. 

Dr. Sze pointed out that during the w-ar all European steamship 
lines were stopped and trade with western countries was suspended. 

Mr. Hanihara then pointed to the decided preponderance, by a 
wide margin, of the Japanese trade in Tsingtao in 1919 compared 
with the trade of other countries. The total trade of Tsingtao 



18 

amounted to a little over 87,000,000 Mexican dollars, of which 
60,000,000 Mexican dollars was represented by Japanese trade. The 
difference between the conditions under the German regime and 
those proposed by the Japanese Government should be emphasized. 

Dr. Sze said that he was given to understand that something 
decidedly better was to be offered, but, he pointed out, an excep- 
tional feature was going to be attached to the Tsingtao customs — a 
feature which was absent at any other port in China. 

Mr. Hanihara here emphasized the difference of the character of 
the Japanese traders in Tsingtao from those at other ports in that 
at Tsingtao there were a great number of small traders who under- 
stood neither English nor Chinese. 

Dr. Koo said that it was his opinion that the growth of Japanese 
trade in the Chinese ports had nothing to do with the use of the 
Japanese language. The Japanese trade in Tsingtao was placed 
in a very favorable position and the use of the Japanese language did 
not seem to him to be essential to its growth. It was perfectly 
true that under the German regime the German language was recog- 
nized as the official language, but Japan had offered to restore the 
Kiaochow leasehold to China and to make the Tsingtao customs 
an integral part of the Chinese customs system. He hoped that Mr. 
Hanihara would not try to diminish the luster of this offer by attach- 
ing conditions to it. 

Mr, Hanihara admitted the use of the Japanese language was not 
the main cause of the development of Japanese trade. But, at the 
s'ame time, the great facilities that would accrue to the Japanese 
from the use of their own language in the Tsingtao customs could 
not be denied. That facility was at present being enjoyed by the 
Japanese, and were it to be suddenly taken away from them their 
suffering would be great indeed. There was no desire or intention 
whatever to interfere with the interest of other nationals or with 
the customs system of China. The importance of the matter could 
only be realized if it had been considered in the light of the actual 
interests of the Japanese traders, especially the smaller merchants. 

Sir John Jordan suggested the possibility of some arrangement 
being made by which proper and full facilities might be provided 
for the Japanese. 

Dr. Sze suggested that the difficulty of the Japanese traders might 
be met by having an official translator in the customs office. 

Mr. Hanihara said he did not necessarily insist upon having Jap- 
anese as one of the official languages, but only upon an arrangement 
being made by which papers written in the Japanese language could 
be accepted at the Tsingtao customs. 

Dr. Sze did not consider it fair that the customs commissioner 
should be made to reply in Japanese to papers written in that 
language. 

Mr. MacMurray said that, while he might be in the wrong, his un- 
derstanding was that Japan was merely asking for the use of the 
Japanese language for customs papers, not in the sense that notices, 
instructions of the commissioner general, correspondence, etc., should 
all be made in Japanese, but that Japanese should be permitted to 
file their papers in Japanese. He asked Mr. Hanihara if that was 
not the point. 



19 

Mr. Hanihara said that he expected notices, instructions, and the 
like should also be given in Japanese and that he thought this could 
be done easily by employing at the customs office men versed in the 
Japanese language. 

Sir John Jordan inquired of the Chinese delegates about the actual 
practice at other ports; for instance, such as Harbin and Hangkow. 

Dr. Sze replied that at Harbin no Japanese were employed except 
a few in connection with railways. At the Hangkow customs the 
languages officially used are English and Chinese. There were there 
many French merchants, and they could address their communica- 
tions in French, which would always be answered in English. It 
would not be fair for the customs commissioner to be required to 
sign documents written in a language which he did not understand. 

Mr. Hanihara said he noted that the Chinese delegation pledged 
all possible facilities for the Japanese traders at the port of Tsingtao, ' 
and he suggested that the rest be left to the arrangement between 
the inspector general and the Japanese minister at Peking. 

Dr. Sze thought it better, in order to avoid the possibility of mis- 
understanding, to have a definite decision right here. 

Dr. Wang suggested the employment of Chinese at Tsingtao who 
understood Japanese in order to take care of all papers written in 
Japanese. 

Mr. Hanihara hoped that his Chinese friends would take into con- 
sideration the actual situation in Tsingtao, where there were many 
small Japanese traders whose interests had to be protected. He did 
not see how it could be difficult for his Chinese colleagues to agree 
to this very reasonable proposal, which was not calculated to be 
detrimental in the least to the trade interests of other countries nor 
to the customs system of China. 

Dr. Sze, in this connection, made reference to his own experience 
in Harbin, where the Japanese consul general, who understood 
English, French, and Russian, persisted in writing to him in Japa- 
nese. He had nobody with him who understood Japanese and had 
to undergo much difficulty on that account. He would not have 
mentioned this incident had not Mr. Hanihara pressed him so hard. 

Mr. Hanihara did not know anything about the incident, but he 
supposed it was because of the common practice for diplomatic 
officers to write official notes in their own language. 

Dr. Sze pointed out that the same consul general wrote to his 
colleagues from other countries in Harbin in English or French, as 
the case might be. 

Dr. Koo thought the spirit of the Japanese proposal in this whole 
matter of the Tsingtao customs w\as admirable, but he did not see 
how the recognition of the use of the Japanese language could make 
the Tsingtao customs more clearly an integral part of the Chinese 
customs system. 

Mr. Hanihara again dwelt upon the many privileges enjoyed by 
the Germans which Japan now proposed to relinquish, the use of 
the Japanese language being the only one desired by Japan. 

Dr. Koo asked if all these privileges were to be given up without 
any conditions. 

Mr. Hanihara said that there might be some other minor privilesres 
besides those enumerated by him at the outset, but that it was in- 
tended to waive- all these privileges except this matter of language. 



20 

Dr. Sze inquired if that was the only point insisted upon. 

Mr. Hanihara referred Dr. Sze to the concrete proposal he had 
made early in the meeting. Japan desired to have Japanese made 
one of the official languages and to have officials versed in the Japa- 
nese language appointed at the Tsingtao customs office. 

Dr. Sze had just understood that the question of langTiage was 
the only point insisted upon. He had purposelj- inquired whether 
that Avas the only point Mr. Hanihara desired to insist upon, but he 
now found that there was another proposal. That made the con- 
versation impossible. 

Mr. Hanihara said that the second point was a corollary of the 
first. He did not approach the whole question in a petty spirit of 
discussion, but, on the contrary, in a most friendly spirit, which he 
hoped Avould be reciprocated b}' his Chinese colleagues. 

Dr. Koo asked if he was to understand that if the first point was 
not agreed to, the second would naturally be dropped. 

Mr. Hanihara said the two points were related to each other. 

Dr. Koo said that the Chinese delegates wished to facilitate prog- 
ress and that the useful discussion the^^ had on this point made things 
clearer than at the beginning. They were now prepared to meet the 
Japanese proposal halfway. To that end he would propose some 
such formula as this : " The Chinese Government will make a recom- 
mendation to the Inspector General of the Chinese maritime customs 
w^ith a view to permitting the Japanese traders at Tsingtao to com- 
municate with the said customs in the Japanese language." He 
hoped that that would make things easier for the Japanese traders. 

Dr. Wang said that the above formula would dispose of the second 
point inasmuch as by that arrangement the employment of officials 
versed in the Japanese language would be made necessary. 

Mr. Hanihara said the Japanese proposal was not made in the 
form of a demand ; that it was merely the expression of a desire on 
the part of the Japanese GoA'^emment, with a vieAv principally to 
the actual conditions at Tsingtao. In this connection he would 
point to the difference again between the conditions under the Ger- 
man regime and the Japanese proposition. 

Dr. Koo said that the selection of customs officials must be left 
to the discretion of the Inspector General, he being the person who 
knew best who w^ould be most suitable for the positions in the cus- 
toms office. 

Dr. Sze mentioned the fairness Avith which the Inspector General 
had discharged his duties these many years, and how no complaint 
of partiality in the matter of the appointment of officials was ever 
made. 

Mr. Hanihara said that theoretically he had nothing to say against 
that system, but that, as a matter of fact, and as experience in the 
past seemed to tell, disagreeable incidents might arise from the ab- 
sence at the Tsingtao customs office of a sufficient number of persons 
who understood the Japanese language. What Japan w^anted in this 
respect was A^ery little though she might ask much if she wanted to. 

Dr. Sze wanted to be informed of the facts of the unpleasant ex- 
perience referred to by Mr. Hanihara, so that the Inspector. General 
might look into them. 

Mr. Hanihara said that he did not want to enter into that discussion.. 



21 

Dr. Koo desired to have the second Japanese proposal made clear 
once more. (He was given the typewritten copy of the two Japanese 
proposals.) Dr. Koo found out that the Japanese proposals had not 
been made as a condition to the surrender of the Tsingtao customs, 
but only as Japan's wish. 

Mr. Hanihara said it was the wish of the Japanese Government to 
have those two points given favorable consideration. 

Dr. Koo said he would propose a tentative formula that the Chinese 
Government would make a recommendation to the Inspector General 
that in his selection of the staff of the Tsingtao customs consideration 
be given, within the limits of the established service regulations, to 
the diverse needs of the port of Tsingtao. He thought the formula 
met the Japanese wish as far as possible without at the same time 
tying the hands of the Inspector General too much. 

Mr. Hanihara said the formula would be acceptable if it was made 
clear that the words " diverse needs " covered the matter of Japanese 
language. 

Dr. Koo thought there was no doubt that the Inspector General 
would take that point into consideration in his selection of the cus- 
toms staff ; but he did not desire to have any discussion in detail about 
what the Inspector General should do. 

Mr. Hanihara thought it would be desirable to have that point 
made clear, so that difficulty might be avoided in future. 

Dr. Koo considered it inadvisable to specify and enumerate the 
needs mentioned in the formula. 

Mr. Hanihara tentatively agreed to the formula, and suggested that 
all questions thus tentatively agreed upon would later be taken up for 
final consideration. 

Dr. Sze emphasized the necessity of impressing the public with the 
results accomplished at these conversations. So he was anxious to 
have a definite decision arrived at upon this question of customs. 

Mr. Hanihara agreed ; only he wanted to have the phrase " diverse 
needs of the port " changed so as to mean the trade needs of the port. 
(After some discussion the phrase " diverse needs of the trade of 
Tsingtao" was suggested and agreed upon.) He once more desired 
to make it, clear that all the decisions and declarations made in regard 
to the Tsingtao customs would be taken, along with decisions and 
declarations that might be made in the course of the conversations, as 
part and parcel of the entire agreement on the Shantung question. 
(It was agreed that this point would unequivocally be recorded in 
the minutes.) 

1. It was decided that, simultaneously with the restitution of the 
leased territory of Kiaochow, the customs house of Tsingtao be made 
an integral part of the Chinese maritime customs, with the under- 
standing (I) that the Chinese Government make a recommendation 
to the Inspector General of the Chinese maritime customs, with a 
view to permitting the Japanese traders at Tsingtao to communicate 
with the said customs in the Japanese language; (II) that the 
Chinese Government make a recommendation to the Inspector Gen- 
eral of the Chinese maritime customs that in the selection of a suitable 
staff for the Tsingtao customs consideration be given within the 
limits of its established service regulations to the diverse needs of the 
trade of Tsingtao. 



22 

ABKOGATIUX OF THE SIX O- JAPANESE PKOVISIONAL ARGEEMENT OF 1915. 

Dr. Koo asked Mr. Hanihara whether it could be understood that 
the Sino-Japanese provisional agreement of August G, 1915, regard- 
ing the Tsingtao customs would naturally be abrogated as a result 
of the above understanding. 

Mr. Hanihara agreed. He desired, however, to make it clear that 
that was to be regarded as a part of the entire agreement on the 
whole question of 8ha]itung. which he hoped would be finally reached. 

2. It was decided that the provisional agreement between Japan 
and China, relative to the maritime customs office of Tsingtao, of 
August 6, 1915, be automatically abrogated as soon as the decision in 
regard to the Tsingtao customs came into effect. 

AGENDA. 

The Chinese delegation wondered whether the question of the 
railway could not be discussed instead of the question of public 
property and the opening of ports and cities, as had been arranged 
at a previous meeting. After a few exchanges of views, it was de- 
cided that the latter two questions should be first discussed, but that 
as soon as they were disposed of, the question of the railway should 
be taken up. 

3. It Avas decided that the question of the railway should be dis- 
cussed as soon as the questions in the agenda were gone through. 

TRESS COMMUNIQUE. 

The press communique was agreed upon in the annexed form (An- 
nex I). 

At 5.30 p. m. the meeting adjourned until 3 p. m. Tuesday, Decem- 
ber 6. 

Washington, D. C, Deeemher -5, 1921. 

SJC— 3. 



Annex I. 



[For the press.] 



December 5, 1921. 



The Chinese and the Japanese delegates met at 3.30 this afternoon 
at the Pan American Union Building. Mr. Hanihara made the fol- 
lowing declaration : " Japan will renounce all preferential rights 
with regard to foreign assistance in persons, capital, and material 
stipulated in the Sino-German treaty of March 6, 1898." The ques- 
tion of the maritime customs of Tsingtao was then discussed. After 
an interchange of views, they have decided that the said customs 
will be made an integral part of the Chinese maritime customs, with 
the understanding, first, that the Chinese Government will make a 
recommendation to the Inspector General of the Chinese maritime 
customs with a view to permitting the Japanese traders at Tsingtao 
to communicate with the said customs in the Japanese language; 
second, the Chinese (Tovernment will make a recommendataion to 
the Inspector General of the Chinese maritime customs that in the 



23 

selection of a suitable staff for the Tsingtao customs, consideration 
be given within the limits of its established service regulations to the 
diverse needs of the trade of Tsingtao. With these two understand- 
ings the Japanese delegates waived all of the privileges formerly en- 
joyed by the Germans in relation to the maritime customs at Tsingtao. 
The provisional agreement between Japan and China relative to the 
maritime customs office of Tsingtao on August 6, 1915, will be auto- 
matically abr.ogated when the above-mentioned decision comes into 
effect. 

The meeting adjourned to meet at 3 o'clock to-morrow afternoon 



FOITRTH MEETING. 

The fourth meeting, held in the governing board room, the Pan 
American Union Building, Washington, D. C, at 3.30 o'clock in 
the afternoon of Tuesday, December 6, 1921. 

PRESENT. 

China. — Dr. Sao-Ke Alfred Sze, Dr. V. K. Wellington Koo, Dr. 
Chung Hui Wang. Secretaries: Gen. Fu Huang, Mr. Tung-Fan 
Hsu, Mr. Chuan Chao, Mr. Telly Howard Koo. 

Japan. — Prince I. Tokugawa, Mr. M. Hanihara, Mr. K. Debuchi. 
Secretaries: Mr. S. Saburi, Mr. E. Kimura, Mr. H. Saito, Mr. T. 
Shiratori. 

Also present as observers : 

The United States of America. — Mr. John Van A. MacMurray, 
Mr. Edward Bell. 

The British Empire.— The Right Hon. Sir John Jordan, G. C. I. E.. 
K. C. B., G. C. M. G. ; Mr. M. W. Lampson, M. V. O. 

PUBLIC PROPERTY, 

Mr. Hanihara said that the subject matter to be discussed to-day 
was public property. 

Dr. -Sze questioned what was the meaning of the phrase " in gen- 
eral," used in the Japanese memorandum of September 7. 

Mr. Hanihara desired to explain the Japanese position. In the 
memorandum of September 7 the Japanese Government stated that 
" public property used for administrative purposes within the leased 
territory of Kiaochow will, in general, be transferred to China, it 
being understood that the maintenance and operation of public 
works and establishments shall be previously arranged between the 
Japanese and Chinese Governments." 

He then read a statement, as follows : 

"(1) Public property used for administrative purposes" consists 
of: 

"(a) Property which originally belonged to China and was trans- 
ferred to Germany at the time of lease ; 

"(5) Property acquired or buildings or works constructed by Ger- 
many during the German regime ; and 

"(c) Property acquired or buildings or works constructed by 
Japan during the Japanese occupation. 



24 

"(2) In tlie Japanese memorandum of September T last, it wds 
stated that such property Avould, in general, be transferred to China. 
The words ' in general ' were advisedly used, it being contemplated 
to retain a few buildings and premises for the use of the Japanese 
consulate to be established there. Further, Japanese public schools, 
a cemetery, shrines, and other properties of similar nature shall be 
handed over to the Japanese community for maintenance and preser- 
vation. 

"(3) Public works, such as roads, waterworks, parks, drainage, 
sanitary equipment, etc., shall be handed over to China. In view, 
however, of their close bearing upon the interests and welfare of the 
general public, it is desired that suitable arrangements be first made 
to insure their satisfactory maintenance and management. 

"(4) Enterprises relatinfr to electric light and telephone, stock- 
yard, etc., hitherto under Government management, shall be handed 
over, on suitable conditions, to Chinese corporations to be newly 
organized with Chinese and foreign shareholders. " 

Dr. Koo desired to knoAv whether the idea of the Japanese dele- 
gates in making such classification was that the mode of restoration 
should be different according to the classes. 

Mr. Hanihara replied that the classification was made just to 
explain what sort of public property existed in Kiaochow. Of such 
public property Japan would return to China such portion without 
compensation as they themselves had acquired without compensa- 
tion. 

Dr. Koo desired to know if that proposition referred only to class 
(c) above enumerated. 

Mr. Hanihara explained that the proposition covered not only (c) 
but also (h). All such property as Japan had to obtain by payment 
on her part would have to be compensated for by the Chinese Gov- 
erment. 

Dr. Sze remarked that it appeared as if Japan desired not to return 
the public property in Kiaochow to China but to sell it. He sug- 
gested, with a view to avoiding unnecessary misunderstanding, that 
the Japanese delegation would prepare an informal statement pre- 
cisely enumerating such buildings and works as the Japanese Gov- 
ernment desired compensation for. 

Mr, Hanihara answered that the Japanese delegation did not pos- 
sess any detailed information about the public properties in Tsingtao. 
He wondered whether that was not also the case with the Chinese 
delegation. 

Dr. Sze said that they had no detailed information either. But 
he did not exacth' see what the Japanese delegation wanted. 

Mr. Hanihara said that the idea of the Japanese delegation was to 
appoint a commission to investigate the matter in detail on the spot, 
for the purpose of determining which buildings and works should be 
compensated for and which not. If he was pressed too much, he 
had to fall back on the treaty and to state that the Japanese Govern- 
ment now owned all public properties which had belonged to Ger- 
many. He felt that what Japan was proposing, was a very gener- 
ous and reasonable offer, because Japan was going to give to China 
all public properties, only asking for reasonable compensation for 
such as had been paid for by the Japanese Government. 



25 

Dr. Koo stated that he desired, of course, to leave the question of 
the treaty out of consideration. He felt, however, that he was in 
duty bound to reiterate the position of China whenever he heard 
the affirmation that Japan had lawfully acquired the leased terri- 
tory of Kiaochow. He did not wish that the position of the Chinese 
delegation be misunderstood. It had been agreed that from the 
point of view of present consideration their respective positions 
vis-a-vis various treaties would not be touched. 

Dr. Sze pointed out that there were enumerated in paragraph 2 
of Mr. Hanihara's statement the Japanese consulate, public schools, 
etc. He wanted to have a list of exactly what the Japanese Govern- 
ment desired to retain. 

Mr. Hanihara said he did not have a complete list, but that the 
public market was among the properties to be retained. He could 
assure his Chinese colleagues, however, that nothing unreasonable 
would be retained. He had no "joker" in his proposition. 

Dr. Sze stated that the Chinese delegation would have to face 
questions from their people. 

Dr. Wang observed that the statement of the Japanese delegation 
was in very broad terms. For instance, the phrase " other properties 
of similar nature " might mean anything. He desired that the 
Japanese delegation would specify the public property they desired 
to retain. 

Mr. Hanihara said that while he was unable to enumerate such 
public properties exactly, he could give a few examples ; for instance, 
the headquarters of the Japanese Association, the Commercial Mu- 
seum, the crematorium, the public market, a few statues, epitaphs 
and cenotaphs. About all these agreement could easily be arrived 
at if a committee was appointed to make an investigation on the spot. 

Dr. Koo thought that, in order to facilitate the progress of dis- 
cussion, it would be best to set aside for the moment such details and 
discuss the general principle first. 

Mr. Hanihara said that he quite agreed. 

Dr. Koo stated that, in the first place, the Chinese delegation did 
not feel that they could accept the principle of compensation for 
- the public properties. They were mostly real property which was in 
the nature of fixtures to the territory itself. The question was not 
of the acquisition of such public properties but of their restoration. If 
the question of compensation was eliminated, the matter would be 
simplified. If that point was accepted, then the Chinese delegation 
would agree to go into a detailed examination of the points raised 
by the Japanese proposal. Evidently there were certain classes of 
property whose retention by Japan the Chinese delegates would be 
disposed to consider. In any case, however, he desired to reiterate 
that he and his colleagues could not accept the principle of compen- 
sation. 

Mr. Hanihara regretted that he could not agree. Not that he 
wanted to go into the question of the treaty, but he would again 
point to the great sacrifices in men and money through which Japan 
had acquired her rights in Tsingtao. It was only fair that Japan 
should ask for some compensation. As for the amount to be asked, 
he assured his Chinese friends that it would be reasonable in all cases. 

Dr. Koo stated since the sacrifices made by Japan in the acquisition 
of the properties were mentioned by Mr. Hanihara he desired to be 



26 

permitted to refer to the Chinese note of November 4, a passage of 
which read to the effect that innumerable losses and damages had 
been sustained by the Chinese people in Shantung as a result of the 
Japanese occupation of Tsingtao. 

Mr. Hanihara wondered what damage the stationing of Japanese 
troops along the raihA^ay could have caused to the Chinese people. 

Dr. Sze said that the Chinese delegation were ready to submit a 
list of damages and losses sustained by the Chinese people. 

Mr. Hanihara said that lie was not prepared to take up that mat- 
ter. Japan did not remain in Shantung of her own choice; but, 
since the Chinese Government would not consent to make suitable 
arrangements, she had been forced to remain there. 

Dr. Koo remarked that it was difficult for China to prevent Japan 
from remaining in Shantung; it would be still more difficult to pre- 
vent Japan from leaving it. 

Mr. Hanihara wondered whether they were not drifting back to 
the academic discussions. He suggested that his Chinese friends 
might, at least, consent in principle to the payment of compensation. 

Dr. Koo said that, leaving aside for the moment that question of 
principle which the Chinese delegation could not accept, they would 
be prepared to consider the certain exceptions of suitable character 
mentioned in Mr. Hanihara's statement. 

Mr. Hanihara stated that the properties had been duly acquired 
and Japan had paid the price for them, and therefore he thought 
that the principle of compensation should be admitted. 

Dr. Sze remarked that Japan had already had the full enjoj-ment 
for a long time of such property, and that that ought to be enough 
compensation. 

Mr. Hanihara said that he could not accept such a view. 

Dr. Koo inquired Avhether it was Mr. Hanihara's view that such 
compensation should always take a material form ; whether the luster 
and glorj^ of victory would not have been sufficient compensation 
for Japan for her actual losses and expenses. He thought that the 
whole question should be approached from the broader perspective, 
as had been suggested by Baron Kato. They could not say in the com- 
munique that the whole afternoon had been spent in the discussion 
of the compensation for a handful of public properties in Shantung. 
■ Mr. Hanihara repeated that the Japanese proposition was founded 
on reasonable grounds in view of the actual expenditure made by 
Japan. 

Dr. Sze referred to the attitude of America in regard to Cuba. 
America cleaned the country and spent a great amount of money for 
its development, yet America never asked the Cubans to make com- 
pensations. 

Mr. Hanihara said that it had not been agreed to approach the 
Shantung question in the spirit of charity and philanthropy. 

Dr. Koo said that one of the reasons why the Chinese people had 
opposed the direct negotiations between Japan and China as to the 
Shantung question had been the fear that some serious conditions 
might be attached to the restitution of Kiaochow. They never had 
suspected that compensation would have been implied when it was 
proposed that the public properties would in general be transferred 
to China. 



27 

Mr. Hanihara stated that Japan could retain all public properties, 
if she would. 

Dr. Koo signified that that was where they disagreed. 

Dr. Sze remarked that Japan was going in reality to sell those 
properties instead of returning them. 

ISIir. Hanihara said that Japan was not going to sell things to 
China; she was asking simply for adequate compensation in cases 
where expenditure had been necessary on her part. 

Dr. Koo referred to the language used in paragraph 4 of the Jap- 
anese note of September 7. He did not think that that contained any 
claim for compensation. 

Mr. Hanihara said that Japan did not propose to retain anything 
material and important. 

Dr. Koo said that if it could be agreed that the principle of com- 
pensation should be dropped, then the Chinese delegates were ready 
to consider suitable exceptions; namely, the cemetery, the public 
school, etc., which would be retained by the Japanese residents. 

Mr. Hanihara said that that was a matter of course ; but he had to 
insist upon the principle of compensation. 

Dr. Koo said that he had understood that Japan was making a 
voluntary offer to restitute the territory of Kiaochow. It would 
naturally have been expected that there should be as few conditions 
as possible attached to it. As he had remarked the day before, he 
would like to see the luster of the generous proposition of Japan 
remain unimpaired. 

Mr. Hanihara said that his Government were advancing as few 
conditions as possible in this question. 

Dr. Koo cited the case in private law where a person built a house 
on another man's land, and said that in such a case compensation was 
not to be granted. He did not mean to argue that way, but he only 
mentioned it in his eagerness to persuade his Japanese colleagues to 
give up the demand for compensation. 

Mr. Hanihara asked if the Chinese delegation was ready to offer 
compensation for some of the properties, at any rate. 

Dr. Koo answered that, in so far as those public properties men- 
tioned under the second paragraph were concerned, the Chinese dele- 
gation were ready to do more than pay compensation; they were 
willing that these should be retained by the Japanese. 

Mr. Hanihara asked Dr. Koo if, laying aside the point of compen- 
sation, he had any observation to offer on the other points of the 
Japanese proposition. 

Dr. Koo remarked that, apart from the question of compensation, 
they were prepared to make suitable exception in favor of the Jap- 
anese community from among the public properties to be handed 
over to China. 

Mr. Hanihara thought they had to go back to the origin of the Jap- 
anese rights in order to fully appreciate the spirit of the Japanese 
proposition. Japan proposed to return all these public properties in 
Shantung which she could retain if she wanted to. She was asking, 
instead, only compensation. As for cemeteries, schools, and the like, 
Japan was going to keep them. There could be no question of asking 
permission for their retention. 



28 

Dr. Koo remarked that it would facilitate the progress of the dis- 
cussion if it was kept in mind throughout that Kiaochow had always 
been a part of Chinese territory. 

Mr. Hanihara said that they fundamentally differed on that point. 
Kiaochow had been taken away from China, and Japan was now 
offering to restore it to China's sovereignty. It was now actually in 
the possession of Japan. He thought that they were going to take 
the facts as they were. 

Dr. Sze pointed out that there was the expression " eventual restora- 
tion " on one of the Japanese official notes, and he expressed surprise 
at seeing that phrase now turned into " eventual selling." 

Mr. Hanihara said that it did not seem to him that the Chinese 
delegates viewed the question in a correct light. There was no ques- 
tion of asking compensation for the restoration of Kiaochow. The 
question was only about certain public properties for the acquisition 
of which Japan had to pay the expenses. It w^as only fair that these 
expenses should be refunded. 

Mr. Hanihara, continuing, said that it was apparent they could 
not come to an agreement about the first and second points of the 
Japanese proposition, and he wondered what his Chinese colleagues 
had to say about the third and fourth. 

Dr. Koo said that the public properties coming under item 4 were 
evidently properties that would belong to the municipality, and that 
it would be proper that these should be given over to the Tsingta* 
municipality which would be set up by China. He did not see 
why so much anxiety should be entertained about the maintenance 
and management of these properties, because it was as much the 
interest of China as of anybodyr else that they should be kept in 
good order. 

Mr. Hanihara agreed to Dr. Koo's remark in theory, but he thought 
it would turn out to be the interest of China as well as the foreign 
community in Tsingtao if proper arrangement was made whereby 
these public properties could be kept in good condition. 

Dr. Koo repeated that no one could desire more than the Chinese 
authorities to have them in good condition. 

Dr. Wang cited the instance of the German settlement in Tien-tsin, 
which had been taken up by the Chinese authorities during the war 
and maintained in perfect condition. 

Dr. Koo asked what was meant by " suitable conditions " men- 
tioned in the fourth paragraph of the Japanese proposal. 

Mr, Hanihara said it was proposed that Chinese corporations 
should be newly organized, with Cliinese and foreign shareholders. 
It would be necessary to arrange in what proportion the shares should 
be given to foreigners and Chinese and to provide suitable arrange- 
ments by which the public utilities might be worked satisfactorily. 

Dr. Koo said that the Chinese Government would naturally see to 
that matter. If his experience in all countries, outside China, could 
not be altogether misleading, he thought that there were no fixed 
standards by which to judge the efficiency or inefficiency in different 
cases. There was always a minority who would be finding fault 
and be seeking improvements. It was just the same with Tsingtao 
under Japanese occupation. There recently appeared a series of 
articles by Mr. J. E. Doyle in the China press, criticizing the Jap- 
anese adrninistration of public utilities. He read a passage from the 



29 

articles which was to the purport that there was in Tsingtao insuffi- 
cient water supply, poor electric light, and irregular telephone man- 
agement, and that there was no improvement whatever in seven 
years of Japanese occupation. He did not attach too much im- 
portance to such criticism; he knew there were faultfinders every- 
where. 

Mr. Hanihara asked if it was proposed that these public utilities 
should be run entirely by the Chinese Government, and wondered 
if they were not managed by the local government under the German 
regime. 

Dr. Koo suggested that these public utilities and works should be 
turned over to the Chinese local government. 

Mr. Hanihara said it would be desirable if a municipal council 
upon which foreign interests were represented took care of those 
properties. He mentioned the presence of a great many Japanese in 
Tsingtao, whose interests the Japanese Government were naturally 
anxious should be looked after. 

Dr. Koo said that that solicitude on the part of the Japanese 
Government was quite natural, but he thought it was not necessary. 
He thought it would be easier and would be more conducive to good 
feeling if it was handed over to the local authority. 

Mr. Hanihara remarked that, unless proper arrangements were 
previously agreed to, it was hard for the Japanese delegation to feel 
assured that the interest of foreign residents would be fairly pro- 
tected. He disclaimed distrust on his part of the Chinese authori- 
ties, but he said there were many treaties of a political character 
which had like conditions attached to them. 

Dr. Koo said that the Chinese delegation was prepared to give 
general assurance that the interests of the foreign community would 
be safeguarded. 

Mr. Hanihara stated that it seemed to him inadvisable not to have 
a practical arrangement on that point. He did not know what kind 
of municipal government was going to be set up in Tsingtao, but he 
thought something along the line of the system adopted at Shanghai 
and other settlements might be applied to the present case. 

Dr. Koo said that no concrete project had been worked out as yet 
concerning Tsingtao, but that it was such an important trading port 
that it was impossible for the Chinese Government not to do its best 
to promote and facilitate the foreign interests there. That would 
be the spirit of the Chinese Government toward the foreign interests 
and foreign residents in Tsingtao. He therefore thought that there 
need be no apprehension on the part of the Japanese on that score. 

Dr. Koo said he would summarize the views of the Chinese dele- 
gation in the following way : 

The Chinese delegation could not accept the principle of compensa- 
tion even if that was limited to certain classes of public properties 
only. If the Japanese delegation would consent not to insist upon 
compensation the Chinese delegation would be prepared to consider 
the certain suitable exceptions to be made in favor of the Japanese 
community in Tsingtao. As for the third and fourth points in the 
Japanese proposition, the Chinese delegation considered the public 
works and enterprises ought to be restored to China in order that 

93042—22 3 



30 

they might in turn be handed over to the municipal government of 
Tsingtao, and the latter would take all the necessary measures to 
maintain them in good condition. 

Mr. Hanihara said that he was not able to yield on the first point 
(compensation) and hoped that the question might be discussed 
later. He hoped the Chinese delegation would reconsider the mat- 
ter. He hoped that if they could not agree in principle they might 
at least recognize the reasonableness of compensation for some of 
the properties. He said it was not so much a question of principle 
as of practical settlement. 

Dr. Koo asked if he was to understand that the second, third, and 
fourth points were accepted by the Japanese delegation. 

Mr. Hanihara said he was not quite ready to accept them, because 
he could not clearly understand Dr. Koo's points. He wondered, 
for instance, if the proceeds of the public utilities and works were 
going to be used solely for the interest of the public. In other 
words, he wanted to know if the taxes levied on the waterworks, for 
instance, would be solely devoted to the use of the municipality, or 
would be spent for other purposes. He thought it was most impor- 
tant that the interest of the public should be well taken care of. 

Dr. Koo observed that he thought the Chinese Government could 
give a general assurance in the sense that the municipal government 
of Tsingtao would take into consideration the interests of the foreign 
community in Tsingtao in its administration of the public works and 
utilities. 

Mr. Hanihara said that, unfortunately, he could not agree to the 
counterproposition of the Chinese delegation. 

Dr. Koo said that the difficulty was only on the first point, and that 
if his Japanese friends did not insist on that point, then the Chinese 
delegation would be prepared to accept the second point. 

Mr. Hanihara said that if the Chinese delegation did agree to com- 
pensation for some of the public properties, even if they did not recog- 
nize the principle of compensation, he thought he would be able to 
entertain the views of the Chinese delegation. 

Dr. Koo asked how many public buildings, for instance, there were 
in Tsingtao. 

Mr. Hanihara said he did not possess even the approximate figures, 
and that it was his idea to have the valuation of the public properties 
made by commissioners on the spot. 

Dr. Koo said that it was not because he was in any way ready to- 
accept the principle of compensation that he asked for the figures. 

Mr. Hanihara said the Japanese Government had no intention to 
ask any unreasonable compensation. 

Dr. Sze asked what public properties Mr. Hanihara had in mind for 
compensation. 

Mr. Hanihara said that that was the trouble ; he had instructions 
to ask for compensation, but did not know exactly what properties 
should be compensated for. 

Dr. Sze said that it was like signing a blank check for the Chinese 
delegation to agree to compensation without knowing what i)roperties 
were to be compensated for. . 

Mr. Hanihara said that that could be ascertained only on the spot, 
and that commissioners could easily find out about that. 



31 

Dr. Sze said that he would suggest, in order to facilitate the dis- 
cussion, to adjourn until the Japanese delegation referred to their 
home Government and obtained detailed information about the 
public properties at Tsingtao. 

Mr. Hanihara asked if his Chinese friends had any information 
about those properties. 

Dr. Sze said that he had none. 

Mr. Hanihara remarked that if the Chinese delegation did not 
have any information themselves, it would be impossible for them 
to discuss the matter, even if detailed information were forthcoming; 
from Tokyo. 

PRESS COMMUNIQUE. 

The press communique was agreed upon in the annexed form 
(Annex I). 

At 5.30 p. m. the meeting adjourned until 3.15 p. m. Wednesday,, 
December 7. 

Washington, D. C, December 6?, 1921. 

SJC-4.] 

Annex I. 



December 6, 1921. 



[For tlie press.] 



The Chinese and Japanese delegates met at 3 p. m. in the Pan 
American Union Building, December 6, 1921, and discussed the 
question of restoration to China of the public properties in the 
territory of Kiaochow. 

The meeting adjourned to meet at 3.15 p. m. to-morrow. 



FIFTH MEETING. 



The fifth meeting, held in governing board room, the Pan Ameri- 
can Union Building, Washington, D. C., at 3.15 o'clock in the after- 
noon of Wednesday, December 7, 1921. 



present. 



China. — Dr. Sao-Ke Alfred Sze, Dr. V. K. Wellington Koo, Dr. 
Chung Hui Wang. Secretaries : Gen. Fu Huang, Mr. Tung-Fan Hsu, 
Mr. Cliuan Chao, Mr. Telly Howard Koo. 

Japan. — Prince I. Tokugawa, Mr. M. Hanihara, Mr. K. Debuchi. 
Secretaries: Mr. B. Kimura, Mr. H. Saito, Mr. T. Shiratori. 

Also present as observers : 

The United States of America. — Mr. John Van A. MacMurray, 
Mr. Edward Bell. 

The British Empire. — The Right Hon. Sir John Jordan, 
G. C. I. E., K. C. B., G. C. M. G.; Mr. W. M. Lampson, M. V. O. 



"^o 



PUBLIC PROPERTY. 



Dr. Sze said that the views of the Chinese delegation on the 
question of public jDroperties had been given the day before, and 
that they would welcome any further observation on the part of 
Mr. Hanihara. 

Mr. Hanihara said that there was not much to be added, but that 
he Avould try to make the position of the Japanese delegation a 
little clearer. In the first place, he wanted to emphasize once more 
his belief that the Japanese were entitled to compensation in hand- 
ing to China the public properties which Avere acquired or built by 
the Germans during their regime; that the position of Japan was 
quite tenable as a matter of both law and justice. It seemed the 
Chinese delegation, in claiming the surrender of the properties 
without compensation, had failed to appreciate the distinction be- 
tween the territory of Iviaochow and the public properties upon that 
territory. Japan proposed to restore the territory to China, but 
the ownership of the public properties was upon entirely different 
footing. Those buildings and works erected by the Germans had 
never been in the possession of China ; in other words, China had 
at no time possessed any title to them. The disposition of these 
properties had nothing to do with the question of the territorial 
right to Kiaochow. Japan could, for instance, obtain a property 
in the District of Columbia without the sovereignty of the United 
States being in any way affected. All those public properties in 
Tsingtao had been ceded to Japan and Japan now proposed to trans- 
fer, not to restore, the essential part of these properties to China, 
only asking for some of them proper compensation. That was the 
position of the Japanese Government, but, in the interest of speedy 
settlement of the Shantung question, the Japanese delegation were 
prepared to give further consideration upon this matter of com- 
pensation, should the Chinese delegation be disposed to meet him 
halfway. He was only referring to the public properties under (b) 
as given in the Japanese proposition. Further, in making that offer, 
he must not be understood as abandoning the position taken by 
Japan as to the propriety of the demand of compensation. 

Dr. Sze wondered if Mr. Hanihara could not extend that offer to the 
property under (c) , since he said that he was ready to meet the Chinese 
delegation halfway. As to Mr. Hanihara's remark that China had 
made no contribution whatever in respect to the public properties 
in Shantung, he would mention the fact that 20 per cent of the 
whole customs revenue at Tsingtao had been yearly contributed to 
the Japanese Government of Tsingtao. 

Mr. Hanihara said that he didn't know anything about the pub- 
lic properties having in part been built or maintained with that con^ 
tribution. What he had just j)ointed out was merely the fact that 
China didn't have any ownership or claim upon them.- 

Dr. Sze asked Mr. Hanihara for more light upon that group of 
properties which it was intended should remain in the hands of the 
Japanese at Tsingtao. He thought it was desirable to have these 
properties specified, so that the misgivings of the Chinese people 
might be dispelled. He wanted, for instance, to know exactly how 
many buildings it was proposed should be retained for the use of 



the Japanese consulate. He thought the words " a few " were rather 
dangerous. 

Mr. Hanihara said that that belonged to minor details which 
could easily be decided if commissioners of Japan and China met 
and discussed the matter on the spot. He would assure them, however, 
that Japan would only ask for what everybody would agree as rea- 
sonable. 

Dr. Sze asked if the Japanese delegates would say three build- 
ings — one for the consul's residence, one for the office, and one for 
the consular court. 

Mr. Hanihara said he couldn't commit himself without knowing 
the actual needs of the case. 

Dr. Sze insisted upon having the number of buildings for con- 
sular use specified. 

Mr. Debuchi said that it was merely a matter of common sense; 
if commissioners from the two countries met together, these minor 
points could easily be decided. If Japan were to ask for a hundred 
buildings for consular use, why, everybody would laugh. 

Dr. Sze said he thought that the public market was in charge of 
the municipality and that it might be better to transfer it to the 
Chinese municipality if only in the interests of public sanitation. 

Mr. Hanihara said that he didn't know what the case was with the 
public market. 

Dr. Sze said that if it had always been in the hands of the resi- 
dent Japanese they could have it, but if it was under municipal ad- 
ministration there would seem no reason why it should be retained 
by the Japanese association. 

Dr. Koo said that he was glad to hear that his Japanese colleagues 
would be prepared to give further consideration to the question of 
compensation for the properties coming under (h). He would ask 
more light thrown upon that proposal. 

Mr. Hanihara said that his meaning was that if his Chinese 
friends agreed to compensation he would meet them halfway in the 
practical settlement. Of course, that didn't mean that the Japanese 
delegation were giving up their position as to the principle. 

Dr. Koo said that if the Japanese delegation didn't insist upon 
compensation as to properties under (b) the Chinese delegation 
would be prepared to go on to the consideration of properties un- 
der (c). 

Mr. Hanihara said that the solution of the first point depended 
upon that of the second point, tnat all the individual questions must 
be taken as a whole. The concessions he intimated as to (b) de- 
pended upon how much the Chinese delegation was going to concede 
as to ((?). 

Dr. Sze said he was afraid the sort of bargaining Mr. Hanihara's 
remarks would seem to suggest would give an unfortunate impres- 
sion upon outsiders, especially the Chinese people. 

Mr. Hanihara said that it was not a question of bargaining; he 
thought it was impossible to decide only upon one point without 
reference to another. 

Dr. Koo observed that if the settlement of each item depended 
upon that of all other items the progress of discussion would be 
made impossible. For instance, they had come to a complete agree- 
ment the other day upon the question of customs. He hoped that it 



34 

was not meant that that agreement was subject to modification in the 
light of later discussions of otlier items. They had to decide on each 
item as it came uj) with, of course, the understanding that the solu- 
tion of each item had to go with the whole solution of the Shantung 
question. ■ So he would be glad to learn what Mr. Hanihara's defi- 
nite idea was as to (b) before going over to (<?). 

Mr. Hanihara remarked that to be perfectly frank he was going 
beyond his authority in promising concessions as to (6). He must 
ask instructions from Tokyo to authorize him to yield on this in 
order that other matters might be settled in such and such a way. 

Dr. Sze said that if the Japanese delegation took that attitude in 
the discussion of all of the questions that would make the Chinese 
delegates hesitate to come here. 

Mr. Hanihara thought that the Japanese delegation might be giver 
credit for their sincerity. 

Dr. Sze said he never doubted their sincerity. 

Dr. Koo asked if he was to undei'stand that as to the question of 
compensation for properties under (h) the Japanese delegation 
couldn't come to any agreement without specific authorization from 
their Government. 

]Mr. Hanihara said he had not been authorized to ^ive up the 
demand for (h). He would, however, frankly tell his Chinese 
friends that he had reasonable hope for getting that authorization. 

Dr. Koo said that that wouhl make the progress of discussion diffi- 
cult, because the Chinese delegation could not try to meet the point 
of view of his Japanese friends in regard to (c) so long as there 
was un' ertainty as to (h). 

Mr. Hanihara asked if the question of compensation for (b) could 
not be left for later discussion and properties under (e) taken up. 

Dr. Sze suggested that (b)' should be taken up after they had heard 
from Mr. Hanihara on (c). 

Mr. Hanihara said his position as to (c) was the same as the day 
before. 

Dr. Koo said that in the first place he felt in duty bound to make 
it clear that the principle of compensation was not acceptable to the 
Chinese delegation, nevertheless, to facilitate progress, the Chinese 
delegation wotdd undertake that a fair and proper proportion of the 
moneys spent by Japan during her occupation should be refunded to 
the Japanese Government, that proportion to be determined upon the 
general principle of depreciation and continuing value. In this con- 
nection the annual contribution of^O per cent of the total customs 
revenue at Tsingtao which had been made to the Japanese authori- 
ties should be taken into consideration. Further, he felt it necessary 
that it should be made clear that in making this arrangement the 
Chinese delegation didn't in any way acquiesce in the principle of 
compensation. He hoped that this fair and just proposition would 
be acceptable to his Japanese colleagues. 

Mr. Hanihara said he thought it was only fair that Japan 
should claim compensation. It was not simply a question of money, 
so far as the Japanese Government was concerned. 

Dr. Koo said that the main reason why he could not agree to the 
principle of compensation was the peculiar status of the Shantung 
question. The Chinese views did not coincide with the Japanese 
views as to the fundamentals of the matter. 



35 

Mr. Hanihara stated that he had been trying to make it clear that 
the question of the restitution of Kiaochow was an entirely different 
one from the transference of the public property. Territorial rights 
differed from the ownership of property established upon it. 

Dr. Koo said that he could not accept the point of view of Mr. 
Hanihara. As he had said yesterday, according to the principles 
of private law, a building established upon another man's land had 
,to be handed over to the landowner without compensation, but he 
was not going into such an academic question. He thought that what 
Japan demanded was the refunding of moneys expended on the 
public properties in Kiaochow. If the Japanese delegation were 
prepared to give up their claim in relation to the buildings and works 
under (&), then the Chinese delegation would propose to refund a 
fair and equitable proportion of the moneys spent by the Japanese 
Government upon properties under (<?). He wanted to impress 
upon the Japanese delegation the sincere desire of the Chinese dele- 
gation to facilitate the progress of the conversations by meeting them 
halfway. He thought that by the above proposal some of the sub- 
stance of what Japan was after would be obtained. 

Mr. Hanihara emphasized the necessity of making a distinction 
between territorial rights and property ownership. 

Dr. Koo said he was afraid that the spirit of the Chinese proposi- 
tion was not fully appreciated. 

Dr. Sze said that the Chinese delegation had been waiving point 
after point. 

Mr. Hanihara said that the Japenese delegation had made a very 
generous offer which his Chinese friends did not seem to appreciate. 
He was prepared, without compromising the Japanese position as to 
principle, to approach item (c) from the practical point of view. 
He wondered whether the Chinese delegation would consider the 
proposition of compensation in relation to that item. 

Dr. Koo said that their proposal was to refund a fair and equitable 
proportion of what had been expended by the Japanese Government. 
Mr. Hanihara said that he would assure the Chinese delegation 
that,, in order to make a fair valuation, they would appoint a com- 
mission to look into the matter. Japan was not going to ask any- 
thing unreasonable. 

Dr. Sze observed that the Japanese budget for Shantung adminis- 
tration showed in 1917 a surplus revenue of 1,175,000' yen, and in 
1919, 6,888,000 yen. It would be noticed that Japan had obtained 
cinsiderable revenue from the public works in Tsingtao. He sup- 
posed that that was enough compensation. 

Mr. Hanihara remarked that Japan had been spending much 
more than she had acquired. He had some figures on that point. 

Dr. Koo said that the only difference now between the proposals 
of Japan and China consisted in using the words "refunding" or 
" compensation." In substance, they were not at variance. 

Mr. Hanihara said that he was"^ unable to agree to the Chinese 
proposition as presented. He could not agree to the contention that 
the principle of compensation was inapplicable to the properties in 
Shantung. Further, the Chinese reference to the 20 per cent con- 
tribution out of the customs revenue to the government of Tsingtao 
had nothing to do with the value or ownership of property situated 
there. 



36 

Dr. Koo said naturally he would have thought that such amount 
would have been placed in the treasury of the local government, and 
the construction or improvement of public properties had been paid 
out of the same treasury. It was because that point was borne in 
mind that mention was made of the 20 per cent contribution. He 
assured Mr. Hanihara that there was no hidden meaning in the 
formula he had proposed. 

Mr. Hanihara observed that he could not see any connection be- 
tween the customs contribution and the ownership of property. 

Dr. Sze remarked that the Chinese delegation had been making 
concessions with a wew to meeting the Japanese desires. 

Mr. Hanihara said that if the two points just referred to in the 
Chinese proposition were omitted, he would be able to accept it. 

Dr. Sze complained that the Japanese delegation had been cutting 
down the Chinese proposition portion after portion. 

Mr. Debuchi said that the beautiful port of Tsingtao had not been 
built with the 20 per cent contribution of customs revenue made by 
China. Germany had spent something like 10,000,000 marks yearly 
in its construction. Japan had been spending a considerable amount 
of money in maintaining and improving the port. The roads and 
building's were ascribable either to the German or Japanese money 
and enterprise. 

Dr. Sze stated that perhaps a monument ought to be erected on 
which it might be inscribed that the city owed much to Germany and 
Japan. 

Mr. Debuchi said that they had to base their conversation on com- 
mon sense. They had to come to an amicable and satisfactory settle- 
ment. He wished and hoped that his sentiments would be recipro- 
cated. 

Sir John Jordan and Mr. MacMurray suggested that item (c) 
might be first disposed of, leaving out of consideration the question 
of principle, because both delegations had agreed to base their dis- 
cussions on actual facts. 

Mr. Hanihara said that as to item (h) he had to refer to the 
Japanese Government for instructions. 

Dr. Sze signified his agreement to the suggestion of Sir John 
Jordan and Mr. MacMurray. 

Mr. MacMurray said that he understood that Mr. Hanihara desired 
to refer. to the Japanese Government as to item (&), and that as to 
item (c) he was prepared to wave the principle. 

Mr. Hanihara said that he could not agree to the Chinese propo- 
sition which involved the waiving of the principle of compensation 
on the part of the Japanese Government. He preferred not to preju- 
dice the principle, but to take facts as they stood. As to point (&), 
he would refer to his home Government. 

Dr. Koo asked whether Mr. Hanihara was going to recommend the 
Japanese Government to drop their claim as to item ( & ) . 
Mr. Hanihara replied in the affirmative. 

Dr. Sze stated that if the instructions should say " No," then the 
Chinese offer as to item (c) would be dropped. 

At this point Dr. Koo handed to Mr. Hanihara his draft formula, 
which was as follows : 

'■ It is agreed that with reference to property acquired or build- 
ings or works constructed by Japan during the period of Japanese 



37 

occupation, a fair and equitable proportion of the moneys actually 
expended by Japan on such properties, buildings, or works shall be 
refunded, provided that consideration be given to the principle of 
depreciation and continuing value." 

Mr. Hanihara said that he generally agreed with the formula. 
However, he would like to have it made clear that the expenditure 
involved in the improvements made upon such properties, build- 
ing, or works should also be refunded. 

Dr. Sze said that it was a new proposition. 

Mr. Hanihara said that he did not think that that was any tiling 
new. Suppose there was a house acquired during the German occu- 
pation that was in a dilapidated and uninhabitable condition when 
Japan took over the leased territory. Japan spent some money to 
improve the building and made it habitable. It was simply natural 
that consideration should be given to that improvement. 

Dr. Sze said that he thought it was petty argument. If one 
made improvements to a house he would have the enjoyment of 
them, which would be sufficient compensation. 

Mr. Hanihara said that he was not a lawyer and he did not want 
to enter into legal details, but he thought his claim for the refund- 
ing of expenditures in relation to improvements was in reason. 

Dr. Koo said that fair and adequate adjustment had been offered 
and thought that that was sufficient. He was basing his argument 
on common sense. He suggested that the matter of improvements 
could be left to the commissioners to, be appointed by the two Gov- 
ernments. In order to facilitate their deliberations, the Chinese 
delegation would accept the Japanese position on the understanding 
that (c) and (h) were linked together and that on the latter point 
the Japanese delegation were going to ask for instruction. 

Mr. Hanihara then desired to proceed to the discussion of para- 
graphs 2, 3, and 4 of his proposal. 

Dr. Koo said that they were going on to paragraph 2. As he had 
said yesterday, the Chinese delegation were ready to consider the 
handing over to Japan of certain buildings, such as were only for 
the use of the Japanese community; i. e., (1) public schools, (2) 
cemeteries, and (3) shrines. As to the crematorium, public market, 
and the like, he was not sure whether they had been built by the 
Japanese. He thought that that was more for general benefit than 
for the benefit of the Japanese residents alone. However, he was 
not sure. The Chinese delegation had no objection to exclude the 
three classes above enumerated. He did not know about the ceme- 
teries, market places, etc., but he thought that they would best be 
left to the commissioners. 

Mr. Hanihara said there were also commercial museums, and some 
other properties, which the Japanese desired to retain, though he did 
not know much about the details, which, however, could easily be 
ascertained on the spot by the commissioners. 

Dr. Koo said that things that could be used for general benefit 
should be left to the municipality and that those for the benefit of 
the Japanese residents more exclusively should be left in their hands 
and the details could be worked out by a commission. 

Mr, Hanihara signified his agreement. 



38 

Dr. Koo said that it mioht be advisable to establish an impartial 
board of ajD^jraisal or some such arrangement by which the interpre- 
tation of words such as " a few " in the phrase '' a few buildings " 
could be decided. 

Mr. Hanihara said that a joint commission would answer the 
purpose. 

It was decided that such public properties as w^ere used for the 
benefit of the general public should be handed over to the municipal 
government of Kiaochow, and those for the benefit of the Japanese 
residents more exclusively be left in their hands, and that details be 
worked out on the spot b}^ a joint commission. 

Dr. Koo statetl that ])aragraph o was almost agreed upon yesterday. 
The Chinese delegation were prepared to give a general assurance 
that as to those public works which were to be handed over to the 
municipal government, the latter would see to their satisfactory 
maintenance and administration. 

Mr. Hanihara said that what Japan desired was that the voice of 
foreign communities in Tsingtao should in some way be represented 
in the management of those works of public utility. It was only 
reasonable that the residents whose interests were closely bound up 
with their good management should have some voice as to the man- 
ner in which those works should be taken care of. In other words, 
foreign communities should be represented on the municipal board 
or some such organ in the administration of the port. 

Dr. Koo said that the two delegations were not in a position t6 settle 
between them the scheme of the municipal government of Tsingtao. 

Mr. Hanihara said that the time was getting late, and inasmuch as 
the question had close connection with the opening of the port of 
Tsingtao, the two questions might be discussed together to-morrow. 

Dr. Sze said that the Chinese delegation were being pressed by their 
l^eople to take up the question of the railway as soon as possible. He 
desired the assurance of the Japanese delegation that that question 
would be discussed not later than Saturday. 

Mr. Hanihara replied that as soon as the questions on the agenda 
were dealt with, he would be prepared to take up the question of the 

The press communique was agreed upon in the annexed form 
(Annex I). 

The meeting adjourned at 5.30 p. m. until 3.15 p. m. Thursday after- 
noon, December 8. 

Washington, D. C., December 7, 19"21. 



SJC-5.] 

Annex I. 



[For the press.] 



December 7, 1921. 



The Chinese and Japanese delegations met again this afternoon at 
3.15 at the Pan American Union Building and discussed the question 
of transferring to China of the public properties in Tsingtao. Sub- 
stantial progress was made, and the discussions will be continued at 
the next meeting, at 3.15 to-morrow afternoon. 



39 

SIXTH MEETING. 

The sixth meeting, held in governing board room, the Pan American 
Union Building, Washington, D. C, at 3.30 o'clock in the afternoon 
of Thursday, December 8, 1921. 

PRESENT. 

China. — Dr. Sao-Ko Alfred Sze, Dr. V. K. Wellington Koo, Dr. 
Chung Hui Wang. Secretaries : Gen. Fu Huang, Mr. Tung- Fan Hsu, 
Mr. Chuan Chao, Mr. Telly Howard Koo. 

Japan. — Prince I. Tokugawa, Mr. M. Hanihara, Mr. K. Debuchi. 
Secretaries : Mr. E. Kimura, Mr. H. Saito, Mr. T. Shiratori, Mr. E. 
Ivishida. 

Also present as observers : ' 

The United States of America. — Mr. Edward Bell. 

The British Empire. — The Right Hon. Sir John Jordan, G. C. I. E., 
K. C. B., G. C. M. G. ; Mr. M. W. Lampson, M. V. O. 

PUBLIC PROPERTY. 

Dr. Sze wondered if under item (6) in the Japanese proposition 
were not to be included such public properties as wharves and docks, 
warehouses, and so on. 

JV^r. Hanihara said that it was the wish of the Japanese delegation 
to discuss those in connection with the Shantung Railway, inas- 
much as they had such close connection with the latter. 

Dr. Sze wondered if the reclaimed land was to be included in the 
public properties so far discussed. 

Mr. Hanihara said that it was to come under the head of vested 
interests, which were to be discussed later on. He admitted the word- 
ing " administrative properties " might not be accurate. It meant 
X3ublic properties owned by the Government and used for adminis- 
trative purposes. He pointed out that it was true that the properties 
coming under (3) and (4) in the Japanese proposal were somewhat 
different, these being rather more for the use of the community at 
large ; but they were mentioned along with the others, so that the ques- 
tion of compensation for them might be discussed en bloc. Wharves, 
docks, and warehouses were excluded in view of their close connec- 
tion with, and their almost exclusive use for, the Shantung Railway. 

Dr. Sze said that he understood there were wharves for the railway 
and wharves for the steamships. 

Mr. Hanihara said that it was proposed to discuss only such wharves 
as were used for the railway. 

Dr. Sze said that, according to his information. Wharf No. 3 at 
Tsingtao had been originally used for steamships, and that the Jap- 
anese had built extensions upon it and turned it for the use of the 
railway. 

Mr. Hanihara said that it was wharves which came at the termini 
of the railway that were now in question. 

Dr. Sze observed that No. 3 wharf had originally been in the charge 
of the municipality. He would like to point out the great importance 
of these wharves to traders. He felt that the wharves should be taken 
care of by the customs commissioner, as at Shanghai, or by the 
municipality. 



40 

Mr. Hanihara said that the matter could more properly be taken 
up in connection with the railway. 

Dr. Sze asked if all the wharves at Tsingtao did not come under 
item (h). He was solicitous about these public works mainly in 
the general interest of trade. 

Mr. Hanihara said that there was no desire on Japan's part to in- 
fringe upon the principle of equal opportunity at Tsingtao; that 
she did not desire any discrimination in favor of the Japanese, how- 
ever these properties might be finally disposed of. 

Dr. Sze asked if the lands reclaimed by the Japanese were to be 
turned over to the municipal government. 

Mr. Hanihara said that landed properties were included in both 
(h) and (c), but he wanted to point out in connection with the ques- 
tion of their disposition that there were certain land lots which were 
leased by the Japanese authorities to private individuals, and upon 
which were built houses, manufactories, etc. It was desired that the 
lessee should be allowed either to have the lease continued or to have 
the land sold to him. All other landed properties were to be disposed 
of according to the principles agreed upon the day before. 

MACHINERY. 

Dr. vSze asked if it was intended that the machinery in the dock- 
yards was to be taken by the Japanese. 

Mr. Hanihara said that he did not Iniow anything about those 
matters of detail. 

Dr. Sze suggested making a list of what to give up and what to 
retain. 

Mr. Hanihara said it was impossible to make any such inventory 
here. 

Di-. Sze admitted that more knowledge and information might be 
available for a local settlement of the matter, but it was impossible 
for the Chinese delegation to go on with the negotiation without 
knowing what they were negotiating about. 

Mr. Hanihara again suggested the appointment of commissioners 
for a detailed settlement. 

SALT FIELDS. 

Dr. Sze asked how it was with the salt fields. 

Mr. Hanihara said that Japan wanted to have the interests of 
the Japanese in the salt industry respected. Those interests were 
among the vested rights. 

Dr. Sze said that this question of salt was a serious one. Salt was 
placed under Government monopoly and the revenue from the salt 
monopoly formed the security for various foreign loans, in some 
of which Japanese interests were involved. If only for the security 
of those loans, China wanted the salt industry reserved for her. 
As for the export of salt produced in Tsingtao to Japan, suitable 
arrangements could be made, but the industry itself could not be left 
in the hands of any foreign nationals. He did not know whether 
the salt industry was at present in the hands of private individuals 
or of the municipality. 



41 

Mr. Hanihara said that there were three private companies en- 
gaged in the industry, and that while he had some observation to 
make on that subject he wondered if it would not be better to come 
back to the question of public properties. 

Dr. Sze said that the classification of public properties was not 
quite clear to him and that he felt as though he were discussing in 
darkness. 

AGREEMENTS CONFIRMED. 

Here the two decisions made yesterday were submitted by Mr. 
Hanihara for confirmation. The first, which was about the class 
(<?) in the Japanese proposition, was read and confirmed as follows: 

Agreement 1. — It is agreed that with reference to properties ac- 
quired or buildings or works constructed by Japan during the period 
of Japanese occupation a fair and equitable proportion of the moneys 
actually expended by Japan on such properties, buildings, or works 
shall be refunded, provided that consideration be given to the prin- 
ciple of depreciation and continuing value. 

The second decision was about the class of properties which it 
was proposed should remain in the hands of the Japanese — among 
them such public properties as schools, shrines, and cemeteries pre- 
sented no difficulty for agreement. It was about other objects among 
this class, such as public markets, museums, and the like, that the 
following formula was adopted in their practical disposition : 

Agreement 2. — It is agreed that such public properties as are re- 
quired for the benefit of the general public should be handed over 
to the municipal government of Tsingtao and those required for the 
Japanese consulate to be established there, as well as those required 
more especially for the benefit of the Japanese community, such as 
schools, shrines, cemeteries, and other properties of similar nature 
should be left in the hands of the Japanese, and that details be 
worked out on the spot. 

Mr. Hanihara said he desired to make it clear that the properties 
to be retained by Japan might be as well in class (&) as in class (c). 
The houses for consular use, for instance, might be taken from among 
class (&). 

Dr. Koo said he understood. 

DOCKS AND WHARVES TO BE DISCUSSED LATER. 

Mr. Hanihara suggested that paragraph 3 of the Japanese propo- 
sition might now be taken up. As stated before, public works, such 
as roads, waterworks, parks, drainage, sanitary ecfuipment, etc., would 
be handed over to China. It was, however, desired that suitable ar- 
rangement should be first made to insure their satisfactory mainte- 
nance and management. Since it seemed to him that the question of 
such arrangement might more appropriately be taken up with the 
question of the opening of ports he would suggest to discuss them 
along with the latter question. 

Dr. Koo said that, as pointed out by Dr. Sze, docks and warehouses 
might more properly be included in paragraph 7 of the Japanese note 
of September 7 than in paragraph 3, as was now proposed by the 
Japanese delegation, but he would not insist upon that, so that the 
discussion might be facilitated. 



42 

Mr. Hanihara said he thought the question of wharves and ware- 
houses coukl not usefully be discussed without reference to the ques- 
tion of the railway. At least it was convenient to deal with them in 
connection with the railway, of which they formed the terminus. 

Dr. Koo said that they could be used quite independently of the 
raihvay and managed either by the municipality or by the customs 
authorities. They would seem, in the nature of things, to fall under 
public properties. 

Mr. Hanihara said that they might well be called public properties; 
they were run by the Japanese Government, at any rate. At the same 
time they were business establishments and were, so to speak, an in- 
separable part of the whole railway system. He was not speaking of 
other whai'ves not connected with the railway. Whatever disposition 
might be made of the wharves necessarily depended upon the disposi- 
tion of the railway. It was by far the best that they should be treated 
together. 

Dr. Koo said that he didn't quite agree with that viewpoint, but in 
the interest of progress he would consent to go over to the discussion 
of paragraph 3 of the Japanese proposition. 

Mr. Hanihara said that what the Japanese delegation had in mind 
about these public works was that in opening Tsingtao the Chinese 
Government would have to make regulations for its administration, 
and that should those regulations and measures which the Chinese 
Government would adopt act prejudicially to the interest of the Jap- 
anese or other nationals protest would naturally be forthcoming. It 
was to avoid such eventuality that definite arrangement was desired, 
not that the Japanese delegation entertained an}^ apprehension that 
the Chinese Government might neglect the interests of the foreign 
community, but it seemed to him advisable to have a previous arrange- 
ment which would prove satisfactory both to China and to the foreign 
community. He wondered if the Chinese delegation had any idea of 
what particular sort of administration was going to be instituted at 
Tsingtao. ^ 

Dr. Koo* said that he appreciated the solicitude of his Japanese col- 
leagues for the satisfactory administration of the locality and the port. 
He had no idea of the plan of the Tsingtao municipality which would 
be set up by the Chinese Government. He could, however, give some 
idea of the spirit in which the Chinese Government would enter into 
the work of establishing the local government of Tsingtao. He would 
read a passage from the Chinese note of October 5 addressed to the 
Japanese Government in which that spirit was clearly set forth. The 
passage referred to was as follows : 

"As to the regulations governing the opening of such places, China 
will undoubtedly bear in mind the object of affording facilities in 
international trade and formulate them according to established 
precedence of self-opened ports and seas. Therefore there is no 
necessity in this matter for any previous negotiation." 

In other words, in formulating the plan of administration for this 
important port the Chinese Government would be guided by the 
policy of promoting the general interest of the foreign community 
as well as of the C'hinese. The work might perhaps be left to the 
Chinese Government. There were, of course, a great number of 
foreigners resident in Tsingtao, of whom the overwhelming ma- 
jority were Japanese. Any injustice or misgovernment on the part 
of the Chinese 'ocal authorities would not escape their judgment 



43 

and criticism. It was desired that the earnest and genuine inten- 
tion of the Chinese Government to protect the interests of foreign 
trade at Tsingtao should be recognized. 

Mr. Hanihara said he understood, but at the same time it was 
desirable that some sort of assurance be given that the foreign inter- 
ests should be adequately represented in the municipal administra- 
tion. Not that it was feared that the Chinese Government might 
deliberately act against the interests of the Japanese, but, as was 
the case at other open ports, some sort of a municipal council might 
properly be set up at which foreign residents might be represented. 
At Hankow and Tientsin during the war the Chinese Government 
had assumed the administration of the former German and Austrian 
settlements, but he understood the administration of these settle- 
ments was much as it had been under the Germans and the Austrians. 
It was admitted by the Chinese delegation that there should be some 
sort of representation for the foreign interests at Tsingtao. It 
would be desirable for the common interest of all parties concerned 
to arrange in advance what sort of government should be established 
there. 

Dr. Koo observed that when he said the Chinese Government 
would give every consideration to the interests of the foreign com- 
munity he did not exclude the idea of some representation for for- 
eign interests. Only it was difficult to determine what formula 
should be adopted for the municipal administration, or in what 
manner the representation of foreign interests might be provided for. 
It might be added that at an early stage of the administration it 
would be impracticable, in view of the state of political development 
in China, to give franchise, even to the Chinese. It was altogether 
impossible for the Chinese delegation to commit themselves in this 
regard, but he would give a general assurance that everything con- 
sistent with the administrative integrity of China would be done 
for the welfare and interest of the foreign community as well as 
the Chinese. 

Mr. Hanihara wondered if the Chinese delegation could not agree 
to some such formula : 

" The Chinese Government, in formulating the municipal goA^ern- 
ment, should take., into consideration the interests of the foreign 
community and see that some organ be formed upon which foreign 
interests might be properly represented." 

It would be expedient that the public works mentioned under 
paragraph 3 should be handed over to such an organ as proposed 
above. That body would undertake the control, if not the manage- 
ment, of such public works. 

Dr. Koo said he felt there was not much difference of views in sub- 
stance. Only, the Chinese delegation could not say anything about 
the form of the local government because it might be dangerous to 
try to be specific about that. What he understood was that the de- 
sire of the Japanese delegation was, principally, that the foreign com- 
munity should have some voice in the protection of foreign interests. 

Mr. Hanihara said that the foreign community should have voice 
not only in the protection of foreign interests, but also in regard to 
the proper maintenance and management of those public works. 

Dr. Koo wondered if the whole idea could not be expressed in some 
such way : 



44 

"The Japanese delegation expressed the desire that the Chinese 
Government, in formulating the plan for the local administration 
at Tsingtao, should give full consideration to the desirability that 
foreign interests at Tsingtao should have some voice in the adminis- 
tration." 

Mr. Hanihara said that the question was more especially of the 
public utilities. It was desired that these should be devoted solely 
to the interest of the conmiimity, and that, in their management and 
maintenance, an arrangement should be made whereby the foreign 
community should be allowed to have some voice. 

Dr. Koo said he appreciated the wish of the Japanese Government 
in this matter, and he thought that that wish could be met by adopt- 
ing some such formula : 

" In the maintenance and management of public works mentioned 
under paragraph 3 of the Japanese proposition, foreign interests 
in Tsingtao should have fair representation." 

Mr. Hanihara sdid that there was no question of any exclusive 
rights for the Japanese only. In the opening of the Tsingtao port 
and other places in Shantung, it was expected that the Chinese Gov- 
ernment would make regulations for their opening. Japan desired 
that in those regulations it should be provided that the interests of 
the foreign community should be represented in the administration 
of municipal affairs. It was desirable that a municipal organ, upon 
which the foreign community would be represented, should control 
and supervise the public works which Japan now proposed to hand 
over to China. 

Dr. Koo said that it was agreed that in the management of public 
works foreign interests should have fair representation. As to the 
form of government, it was difficult to discuss it, as they had as yet 
no definite plan for the municipal administration, but assurance 
could be given that the Chinese Government, in formulating the 
Tsingtao mimicipality, would give full consideration to the interests 
of the foreign community. 

Mr. Hanihara said that he felt that they were very near an agree- 
ment. He would present a formula at the next meeting. 

PRESS COMMUNIQUE. 

It was decided that the press communique for to-day be issued in 
the annexed form (Annex I). 

An adjournment was taken at 5.30 p. m., the subsequent meetings 
to take place to-morrow at 11 a. m. and at 3 p. m. 

Washington, D. C, December 8, 1921. 



Annex I. 

SJC— 6 1 

December 8, 1921. 
[For the press.] 

The Chinese and Japanese delegations met again this afternoon at 
3.15 at the Pan American Union Building and discussed the question 
of Shantung. The discussion will be continued at the subsequent 
meetings at 11 a. m. and 3 p. m. to-morrow. 



45 

SEVENTH MEETING. 

The seventh meeting, held in the governing board room, the Pan 
American Union Building, Washington, D. C., at 11 o'clock in the 
morning of Friday, December 9, 1921. 

PRESENT. 

China. — Dr. Sao-Ke Alfred Sze, Dr. V. K. Wellington Koo, Dr. 
Chung Hui Wang. Secretaries: Gen. Fu Huang, Mr. Tung-Fan 
Hsu, Mr. Chuan Chao, Mr. Telly Howard Koo. 

Jci'paih — Prince I. Tokugawa, Mr. M. Hanihara, Mr. K. Debuchi. 
Secretaries : Mr. E. Kimura, Mr. H. Saito, Mr. T. Shiratori, Mr. E. 
Kishida, 

Also present as observers : • 

The United States of America. — Mr. John Van A. MacMurray, 
Mr. Edward Bell. 

The British Empire. — The Right Hon. Sir John Jordan, G. C. 
I. E., K. C. B., G. C. M. G. ; Mr. M. W. Lampson, M. V. O. 

PUBLIC PROPERTY. 

Mr. Hanihara said that he tried to incorporate his ideas in the 
formula which had been presented by E>r. Koo the day before. He 
did not care much about the wording, but he desired that the sub- 
stance should be accepted. His formula read as follows : 

" In handing over to the Chinese Government public works in 
Tsingtao, such as roads, waterworks, parks, drainage, sanitary 
equipment, etc., it is agreed that, in view of the close bearing they 
have upon the interests and welfare of the general public, repre- 
sentatives of the foreign community in Tsingtao should be called 
on to cooperate in the maintenance and management of such public 
works." 

Dr. Koo wondered whether he could accept that formula. The 
underlying idea of the formula he had proposed yesterday was that 
the foreign community in Tsingtao should have fair representation, 
but he could not accede to the Japanese proposal, which involved the 
commitment on the part of the Chinese Government as to the form 
of the municipal government to be set up in Tsingtao. 

Mr. Hanihara observed that the expression " fair representation " 
might mean anything. His main idea in proposing the above for- 
mula was to obtain some assurance as to the manner in which the 
voice of the foreign community should be equitably represented. 

Dr. Koo suggested that, with a view to meeting Japan's wishes, 
the formula might take the following form : 

" The Chinese delegation take note of the desire of the Japanese 
delegation that in the management and maintenance of the public 
works in Tsingtao such as roads, etc., the foreign community at 
Tsingtao should have fair representation." 

The idea prompting his proposal was not to object to any such 
representation. Only, he could not bind down the Chinese Govern- 
ment to any particular form of representation. He thought the 
93042—22 4 



46 

important point was that there should be fair representation of the 
voice of the foreign community. 

Mr. Hanihara said that what Japan was concerned with was a 
practical assurance. What he desired was that the form of the 
municipal government should be such as to offer that assurance. 

Dr. Koo said that that was the intention underlyhig the formula 
he had proposed. To the assurance as such he had no objection, 
but as to the question of the form of the municipal government he 
had to take into consideration the public sentiments of China. He 
did not desire to compromise the principle of administrative in- 
tegrity. He desired to meet the wishes of the Japanese delega- 
tion in substance, and therefore he wished that the Japanese dele- 
gation would accede to his proposal in the matter of form. 

Mr. Hanihara said that, in connection with the opening of the 
port of Tsingtao, it was anticipated that a certain form of govern- 
ment would be adopted by China. Whatever government there might 
be established, it was desired that the foreign community should be 
permitted to take an equitable part in the management of the public 
works in question. He did not care in what form that should be 
effected. 

Dr. Koo explained that his formula would give substance to Japan 
and form to China. 

Mr. Hanihara said that if an assurance could be given that the 
formula was drawn up in that sense, he could accept. 

Dr. Koo stated that that was the intention of the Chinese dele- 
gation, and that the Japanese delegation could take the agreement 
as embodying the assurance that the foreign community in Tsing- 
tao would be called on to participate in the maintenance and man- 
agement of the works in question in a fair and equitable manner. 

An agreement was reached on the understanding that the Chinese 
delegation gave assurance that actual participation would be per- 
mitted to the representatives of the foreign community in the man- 
agement and maintenance of the public works in question : 

" The Chinese delegation give an assurance t^ the Japanese dele- 
gation that in the management and maintenance of the public works 
in Tsingtao, such as roads, waterworks, parks, drainage, sanitary 
equipment, etc.. handed over to the Chinese Government by the Japa- 
ese Government, the foreign community in Tsingtao shall have fair 
representation." 

Dr. Sze remarked that the electric and telephone undertakings un- 
der paragraph 4 were under municipal government during the Ger- 
man administration. He thought, therefore, that these undertakings 
should also be under the municipality in the future. 

Mr. Hanihara said that they were at present under the Japanese 
Governmental control, as they used to be during the German regime, 
but in point of actual fact the subscribers to the electric and tele- 
phone undertakings were in a large measure Japanese residents. 
Further, the Japanese had business interests in the stockyard. These 
undertakings Avere in their nature better managed as private enter- 
prises rather than as public works. The desire of Japan was noth- 
ing more than to have some share in such private enterprises. Neither 
did he propose that the Japanese should have any special privilege, 
but only that interest should be shared by foreigners and the Chinese 
residents. He thought it best to have those enterprises turned into 



47- 

Chinese corporations, in which foreign residents, inckiding the Japa- 
nese, might have have a share. 

Dr. Sze remarked that when the Tsingtao municipal government 
was set up, they would have to meet expenditures and naturally to 
obtain revenue. It was most desirable that taxation should be 
lightened as far as possible, and he was sure that the undertakings 
in question would be a source of revenue which would make for 
lightening the burden of taxation. He thought it was only fair 
that the municipality should profit by conducting such enterprises. 
Therefore, the public works under paragraph 4 would best be dis- 
posed of in the same manner as those under paragraph 3. In the 
long run that method would prove the most beneficial to the Japanese 
residents as well as the residents of other nationalities in Tsingtao, 
because that would mean less taxation to be paid. 

Mr. Hanihara thought that some arrangement might be made 
whereby to tax the corporations themselves or to let them pay a 
certain amount of royalty. That would meet the requirements of 
the municipal government which Dr. Sze had in mind. To take the 
example of the city of Tokyo, the municipality gave license to certain 
enterprises in the nature of public utilities, of which a certain portion 
of the profit was to be paid into the treasury of the municipality. 
Such undertakings would yield profit, and it was desired that the 
Japanese in Tsingtao should be permitted to participate in such 
profitable business to the same degree as the Chinese. 

Dr. Sze inquired to what degree the Japanese were participating 
in those undertakings at present. 

Mr. Hanihara replied that all of them were under Government 
control. But as to the telephone enterprise, there were at present 
940 subscribers, of which 891 were Japanese. As to the electric-light 
enterprise, he had no statistics, but the situation was more or less 
the same. In consideration of these actual facts, Japan wanted to 
have some proper share in the business. 

Dr. Koo said that he desired to know, merely for his information, 
how these Japanese had come to have such share in it. 

Mr. Hanihara said that they had no share at present, but he now 
proposed to have a corporation made in which the Japanese might 
hold some share if they wanted. He did not think that that was a 
very difficult proposition. He did not want to have a Japanese cor- 
poration established — only the privilege to own shares equally with 
the Chinese was desired. 

Dr. Koo inquired whether these enterprises were German Gov- 
ernment enterprises. 

Mr. Hanihara replied in the affirmative, and said that a new ar- 
rangement was now proposed. 

Dr. Koo stated that, of course, the suggestion to establish a Chinese 
corporation would be inviting to the Chinese people, but if the 
nature of the enterprises was taken into consideration, it would be 
thought better to leave them to the municipal government, as under 
the Japanese and the German administration. 

Mr. Hanihara stated that under the German administration, prac- 
tically everything belonged to the Government — wharves, godowns, 
etc. Such arrangement was natural, because Tsingtao was under 
Germany not only an ordinary commercial port but was more or 



48 

less a military port. Again, Japan's status in Tsingtao was only 
temporary and those German Government enterprises continued to 
be operated under similar management. But now the leased terri- 
tory Avas to be returned to China and it was necessary to look after 
the interests of the Japanese residents there. It was not unreasonable 
at all, because Japan was asking no special advantage or privilege. 

Dr. Koo inquired whether the management at present was found 
satisfactory. 

Mr. Hanihara replied that it was fairly good. However, govern- 
ment business generally incurred more expense than private under- 
takings. That was the case more or less in every place, including 
this country. In order to secure efficient management, private man- 
agement would be more suitable for undertakings of this description. 

Dr. Koo declared tliat electric light and telephone services being 
of great imjDortance to the people, he desired to have them placed 
under municipal control. 

Mr. Hanihara said that the municipal government would have con- 
trol or supervision over such undertakings. As a matter of fact, 
however, in many places in China such services were under private 
management. For instance, in Shanghai and Hangkow telephone 
service was privately undertaken. 

Dr. Koo replied that that was not so in all cases. As to telephone 
service, there might be places where that was started as a private 
business, but the rule was Government management. 

Mr, Hanihara assured Dr. Koo that he didn't desire to prejudice 
the general system adopted by the Chinese Government. However, 
in transferring the public properties in Tsingtao it was required 
that legitimate rights of the Japanese should be taken into considera- 
tion. It was not like the case of some new place absolutely under the 
control of the Chinese Government. Tsingtao had been under the 
control of Japan ever since that place was wrested from the grip 
of the Germans. Actual facts should be given recognition and the 
interests involved should be looked after. 

Dr. Koo replied that the importance of these enterprises made it 
advisable to turn them over to the municipal authorities. There 
would be no ground of complaint on the part of any foreigner. 

Mr. Hanihara said that if the corporations to be established were 
to be Japanese or other foreign corporations, it might be difficult to 
control for the Chinese municipal authorities, but it was proposed to 
form Chinese corporations. 

Dr. Koo inquired whether the point Mr. Hanihara wished to make 
was to establish Chinese corporations and that the Japanese should 
have a share in the proj^erty. 

Mr. Hanihara said that that was the case. It amounted to an 
arrangement by which the Japanese should be permitted to own 
shares. It could be so arranged, perhaps, that the Chinese and the 
Japanese should each own, "say, 500 shares ; or the Chinese, the 
Japanese, and other foreigners 300 shares each. 

There was, of course, difficulty on both sides, but as far as Japan 
was concerned she was going to restore almost everything except these 
few enterprises which it was desired should be turnecl into private 
Chinese corporations with both Japanese and Chinese as shareholders. 
It was only fair that the Japanese at Tsingtao should be permitted to 
share in the profit of such a small number of enterprises. 



49 

Dr. Koo said he understood that the purpose of Mr. Hanihara's 
suggestion was to enable the Japanese and other foreigners to share 
in the profits of these undertakings. The Chinese delegation was 
disposed to accept the proposal in as far as/the stockyard was con- 
cerned. But it was diificult for them to yield on the electric-light 
and telephone services. It was their idea to turn the electric-light 
service over to the municipal government. As for the telephone 
service, it should be left to the department of communications of 
the Chinese Government to dispose of it according to the policy they 
have adopted. It should be pointed out that the stockyard was 
by far the most profitable of all the enterprises enumeratecl. It was 
hoped that the Japanese delegation would see their way to accept 
this compromise. 

Mr. Hanihara remarked that he would once more point to the 
fact that 90. per cent of the telephone subscribers at Tsingtao were 
Japanese. He did not fail to see the point made by Dr. Koo about 
the desirability of the telephone being left to the department of com- 
munications in the interests of a uniform system of communication 
in China. It must be made clear, at the same time, that Japan was 
not proposing to make an exception of the telephone service at 
Tsingtao. The business would be undertaken by a Chinese corpora- 
tion which would be formed by Chinese and Japanese shareholders. 
He thought it was, on the whole, a very fair arrangement and that 
no opposition on the part of the Chinese people was to be expected. 
If, on the contrary, it was given up in a manner desired by the 
Chinese delegation, there Avould be great disappointment and strong 
opposition on the part of the Japanese people. 

Dr. Koo said the stockyard was the most profitable of the three, 
so that it was offered by way of compromise. As to the other two 
enterprises, it was hoped his Japanese friends would agree to the 
desirability of their being managed either by the Chinese Govern- 
ment or by the local government. Public interest was so closely 
bound up with these enterprises. 

Mr. Hanihara said he did not desire to go into the origin of the 
Japanese rights in regard to these enterprises. They were, at any 
rate, under the actual control of the Japanese authorities, and the 
Japanese community in Tsingtao was so vitally interested in them. 

Dr. Koo said it was the rule in every kind of discussion to com- 
promise — to give and to take. 

Mr. Hanihara said that in their present proposition the Japanese 
delegation were ofTering everything. There was no question of give 
and take. He hoped his Chinese colleagues would find themselves 
able to come to an agreement. 

Dr. Koo said that the Chinese delegation had been trying all along 
to accede to the Japanese views and that even here they offered to 
give in as to the most profitable of the enterprises mentioned in the 
Japanese proposition. In their very nature the other two should 
be left in the hands of the Chinese local government, for that seemed 
to him to be the best way to serve the general interest. 

Mr, Hanihara said he would suggest that that enterprise should 
be transferred to the Chinese Government, with the understanding 
that the latter should permit Chinese corporations to be formed 
with Chinese and foreign nationals as shareholders, by which these 
enterprises would be managed. 



50 

Dr. Koo said he did not see much difference in that. 

Mr. Hanihara said it was a question of form. The Chinese dele- 
gation had said that at every step they had met the Japanese offer. 
He appreciated that, but tl;e Japanese offer was the maximum of 
what they could do. They had gone so far in their earnest desire to 
come to a solution. 

Dr. Koo said he regretted the Japanese delegation could not accept 
the compromise. It was not a question of profits, but the peculiar 
nature of the enterprises that underlay the desire of the Chinese 
delegation. 

Mr. Hanihara said that Japan could retain them if she wanted to, 
but instead she was giving them up entirely upon very reasonable 
conditions. 

Dr. Koo said that when the Japanese people learned that the 
stockyard had been obtained they would be grateful to the Japanese 
delegation, because it was a very profitable enterprise. 

Mr. Hanihara said that he could not agree to confine the proposi- 
tion to the stockyard only. He would insist upon the preponderant 
interest of the Japanese in the other enterprises being taken into 
consideration also. 

Dr. Koo suggested leaving the question as it was and going on to 
another item. 

Mr. Hanihara said that he agreed on an understanding that they 
should come back to that later. 

Dr. Koo said that he felt that the Japanese conditions in every 
case were intended as absolute and final. It was very difficult to 
make headway. 

Mr. Hanihara said he desired to meet the Chinese viewpoint as 
far as possible; but as a matter of fact most of the Japanese propo- 
sitions represented the minimum, about which there was no yielding 
much further. 

Sir John Jordan asked Dr. Koo if the electric-light service had to 
be managed by the municipal government. He thought that it was 
different from the telephone service; that there was no fixed rule 
for the management of electric light. 

Dr. Sze said it would never do to give to the municipality only 
things that would produce no benefit. The municipality needed a 
certain amount of revenue. If it did not have the benefit of public 
enterprises for its revenue that would mean so much the more tax 
for the community. 

Mr. Hanihara said the municipal government could, of course, im- 
pose tax or royalty upon these enterprises, that would indirectly make 
the Japanese community contribute to the municipal revenue. 

Dr. Koo said that the Chinese compromise had been offered and 
that he wanted now to hear the Japanese compromise. 

Mr. Hanihara said that that had been stated in this way, that the 
enterprises in question should be turned over to the municipal gov- 
ernment which should permit Chinese corporations to be organized 
by Japanese and Chinese shareholders. As for the telephone service, 
if unification of system was desired, arrangement could be made for 
its incorporation in the unified system at some future time. He un- 
derstood that telephone was being undertaken by private corpora- 
tions at many other places in China; for instance, at Shanghai and 
Hankow. 



51 

Dr. Sze said that at those places the telephone was there before the 
telephone system of the Chinese Government came into existence. 
As to this matter of the telephone service, therefore, there was no 
choice for the Chinese delegation. 

Mr. Debuchi asked if the telephone systems at Nanking and Chang- 
sha were under management of the local government. 

Dr. Sze answered that he could not tell without consulting the 
experts, but, however that might be, China was going to turn over a 
new page. The only regret was that there should be exceptions at 
present. They would not have any more of them. 

Mr. Hanihara asked if the Chinese delegation could not take into 
consideration the actual facts and conditions in Tsingtao in the set- 
tlemeiit of the matter in hand. 

Dr. Sze said that according to the expert, the telephone system of 
Nanking was managed by a Chinese company, but that the share- 
holders were all Chinese. 

Mr. Debuchi asked if it was suggested to exclude all foreign inter- 
ests in Tsingtao. 

Dr. Sze answered it was as far as the telephone service was con- 
cerned. 

Mr. Hanihara said that he saw no reason why it should be difficult 
for the Chinese Government to give licenses to corporations to be 
newly formed in the territory over which China had not had any 
control for so many years. The whole question was about making 
proper arrangements about Tsingtao, for its passage from abnormal 
to normal conditions. It was only natural that in making those ar- 
rangements the actual conditions of the place should be taken into 
consideration. Except those few enterprises enumerated, there were 
practically none in which Japanese nationals could take part. 

Dr. Sze said he admitted that Tsingtao was in an abnormal condi- 
tion, but he thought there was no reason to perpetuate that abnormal 
condition. 

Mr. Hanihara said that nothing of the sort was intended. It was 
only desired that the conditions antecedent should be taken into con- 
sideration. It was one thing to ask for participation by the Japanese 
in a new telephone system at other places in China. It was quite 
another thing to ask the same thing about the telephone system, in 
which the Japanese are actually so overwhelmingly interested, and 
that in a locality which had been under the actual control of Japanese 
authority. 

Dr. Sze said that the Chinese delegation regretted that they could 
not give in in the matter of principle regarding the telephone. 

Dr. Koo said that in deference to the opinion of their neutral 
friend, Sir John Jordan, he would yield as to electric-light service. 

Mr. Hanihara said that he wantecl to observe that there was only 
one more enterprise, besides those enumerated before, which the 
Japanese delegation had in view. It was the Government laundry. 

Dr. Koo asked how it was about the gas. 

Mr. Hanihara said he did not know anything about the gas. He 
had to see if there was any gas service in Tsingtao. 

Dr. Koo said that that would not present much difficulty for the 
purpose of the present discussion. 

Mr. Hanihara said he found it difficult to agree to the exclusion 
of the telephone system, because the interest of the Japanese com- 



52 

miinity in Tsino-tao was actiiall}^ so closely bound np Avith that 
enterprise. It was not proposed that it should remain in the hands 
of the Japanese, but that it should be turned over and made into a 
private Chinese undertaking, with, of course, the right of super- 
vision in the municipal government. He suggested that the matter 
should be left for later consideration. 

Dr. Sze said that he could not agree to that. It was desirable that 
they should be enabled to tell the public that the three days' discus- 
sion amounted to something. 

Dr. Koo said that the total revenue of the stockyard and the electric 
light amounted to 510.000 yen a year, while that of telephone was 
only 87.000 yen. Mr. Hanihara wished to provide for the profits 
of the Japanese. But the telephone enterprise was the least profit- 
able, as the figures showed. 

Mr. Hanihara said he did not want to discuss figures. He only 
wanted to point out that under Government management the neces- 
sary improvements and extensions of the service would be found 
very difficult. Government funds would necessarily be limited. Ex- 
perience of Japanese municipal enterprises showed the difficulty of 
meeting the needs of the public in small matters. 

Dr. Sze said that, of course, a great deal would depend upon the 
sort of requests the subscribers might make. If the service was 
required 5 or 10 miles from the city, such demand could not be met 
either by private or Government enterprise. The Chinese delegation 
had met the Japanese demand almost at ever}^ point. 

Mr. Hanihara hoped that Dr. vSze would not say that, because it 
was the Japanese delegation who were offering to give up everj'thing. 

Washington, D. 6'., December 9, 1921. 



EIGHTH MEETING. 

The eighth meeting, held in governing board room, the Pan- 
American Union Building, AVashington, D. C, at 3 o'clock in the 
afternoon of Friday, December 9, 1921. 

PKESENT. 

China. — Dr. Sao-Ke Alfred Sze, Dr. Y. K. Wellington Koo, Dr. 
Chung Hui Wang. Secretaries: Gen. Fu Huang, Mr. Tung-Fan 
Hsu, Mr. Chuan Chao, Mr. Telly Howard Koo. 

Japaoi. — Prince I. Tokugawa, Mr. M. Hanihara, Mr. K. Debuchi. 
Secretaries : Mr. E. Kimura, Mr. H. Saito, Mr. T.' Shiratori, Mr. S. 
Sakoh. 

Also present as observers : 

The United States of America. — Mr. John Van A. MacMurray,, 
Mr. Edward Bell. 

The British Emfire. — ^The Right Hon. Sir John Jordan, G. C. I. 
E., K. C. B., G. C. M. G.; Mr. M. W. Lampson, M. V. O. 

Mr. Hanihara said that after consideration upon point (4) he was 
going to make a suggestion which he hoped would meet with the 
approval of his Chinese friends. If China was prepared to give 
assurance that due consideration would be given to the extensions 



53 

and improvements to be required by the residents, the Japanese 
delegation would agree to turn over to China the telephone enter- 
prise ad referendum. He thought that that was a very fair proposi- 
tion. Difference of opinion that had arisen that morning would, 
in that way, be satisfactorily composed. 

Dr. Koo replied that due consideration would be given to such 
matters needed no mention. He thought that Mr. Hanihara was 
not assuming that the present condition was perfect. Everything 
would naturally be done to have improvements and extensions made 
in the general interests of the community, 

Mr. Hanihara thought that the onl3^ difficulty was that such things 
were sometimes neglected if there were no assurance. 

Dr. Koo inquired whether Mr. Hanihara meant extensions and 
improvements for local service onlj^ 

Mr. Hanihara replied that that was precisely the case. 

Dr. Koo said that, in order to meet the wish of the Japanese dele- 
gation, he and his colleagues would accept the Japanese proposal, 
but it was not to be incorporated in the agreement, but to be re- 
corded in the minutes. 

Mr, Hanihara said that he agreed. At this point the formula 
made by the Chinese delegates, reading as follows, was handed to 
Mr, Hanihara: 

" Enterprises relating to electric light and telephone, stockyard, 
etc., shall be handed over to the Chinese Government with the under- 
standing that the stockyard and electric-light enterprises are, in 
turn, to be handed over to the municipal government of Tsingtao, 
which will form Chinese corporations in conformity with the Chinese 
company law to manage them under municipal supervision and regu- 
lation." 

Mr, Hanihara said that he wanted to make it clear that foreign 
nations would be allowed to participate in those enterprises. 

Dr. Sze said that the Chinese company law allowed foreign na- 
tionals to own shares in the Chinese corporations, 

Mr. Hanihara suggested that the phrase " the stockyard and the 
electric-light enterprises " be changed to read " the stockyard, elec- 
tric-light, and laundry enterprises," because there was a laundry 
formerly run by the German Government, the management of which 
was succeeded to by the Japanese administration. He now desired 
to have that laundry enumerated in the agreement, 

Mr. Hanihara, continuing, said that he did not know anything 
about Chinese law, but he wanted to make it clear, if not in the agree- 
ment, at least in the minutes, that the Japanese would be permitted 
to become shareholders in such enterprises, 

Dr, Koo said that he had no objection. 

Dr. Koo at this point said that as to the telephone service, he had 
made a formula which might be agreeable to his Japanese colleagues. 
The formula read: 

"As regards the telephone enterprise which is to be handed over 
to the Chinese Government, the Chinese delegation give an assur- 
ance that the Chinese Government will give due consideration to 
requests from the foreign community at Tsingtao for such exten- 
sions and improvements as may be reasonably required by the general 
interests of the public." 

Mr, Hanihara said that that was not sufficient. He wanted to 
secure the assurance of the Chinese Government. 



54 

Dr. Koo replied that that was as clear as could be. The good man- 
agement of the telephone service would not only inure to the profit 
of the foreign community, but also to that of the Chinese themselves. 
However, if it was desired, he had no objection to have the above 
sense recorded in the minutes in some such way : 

" The Chinese delegation give assurance to make recommendation 
to the Chinese Government * * *." 

He wanted to know whether that met Mr. Hanihara's wishes. 

Mr. Hanihara said that that was not exactly what he wanted. 
What he desired was that the Chinese Government themselves should 
give the assurance. 

Dr. Koo replied that that was more or less implied. 

Mr. Hanihara said that so far as those present here were concerned 
the meaning might be clear, but others might give a different inter- 
pretation. If that point was made clear, the Japanese delegation 
would agree to turn the telephone system over to China ad refer- 
endum. 

Dr. Koo asked whether Mr. Hanihara was not in a position to 
decide at once. 

Mr. Hanihara said that the Japanese Government had had no 
doubt that the Chinese Government would give ready consent to 
this point, and the instructions he had in this respect were very ex- 
plicit. He had, therefore, to refer the matter to the Government for 
confirmation. 

Dr. Koo agreed. 

Mr. Hanihara said that the laundry enterprise above referred to 
should be expressly incorporated in the agreement in relation to 
those enterprises which were to be handed over to the municipal 
government of Tsingtao, with a view to their eventual transfer to 
Chinese corporations to be established. 

Dr. Koo agreed that the laundry enterprise should be so incor- 
porated. 

Agreement relative to paragraph •! read as follows : 

" Entei*prises relating to electric light, telephone, stockyard, laun- 
dry, etc., shall be handed over to the Chinese Government, with the 
understanding that these enterprises are, in turn, to be handed over 
to the municipal government of Tsingtao, which will form Chinese 
corporations in conformity with the Chinese company law to man- 
age them under municipal supervision and regulation. 

" As regards the telephone enterprise which is to b3 handed over 
to the Chinese Government, the Chinese delegation give an assurance 
that the Chinese Government will give due consideration to requests 
from the foreign community at Tsingtao for such extensions and im- 
provements as may be reasonably required by the general interests 
of the public. 

" The Japanese delegation agree to turn over the telephone enter- 
prise to the Chinese Government, subject to confirmation by the 
Japanese Government." 

CABLES. 

Dr. Koo asked whether cables came under the head of public 
property. 

Mr. Hanihara explained that his intention was to treat the ques- 
tion of cables separately. 



55 

Mr. Koo asked under what head they were to be included. 

Mr. Hanihara. replied that that question would be dealt with 
under item 8 of the Japanese memorandum dated September 7 last. 
The complicated aspects of the question made it more advisable that 
it should stand by itself. For example, in discussing that question 
they had to refer to the rights of the Great Northern Telegraph Co., 
and there were several other relevant questions which required more 
or less technical knowledge to be intelligently discussed. 

Dr. Koo contended that they belonged to class (6) of the public 
properties which they had been discussing. They were German 
Government properties. 

Mr. Hanihara insisted that the question should at any rate be 
treated separately. 

Dr. Koo agreed that the question be discussed later, but he de- 
sired that the conditions could not be any severer than those im- 
posed upon them in connection with the questions they had been 
discussing. 

Mr. Hanihara said that the conditions Japan had been proposing 
were and would be all reasonable and fair. 

Dr. Koo said that on that understanding the cable question would 
be discussed under item 8 of the note of September 7. 

Mr. MacMurray inquired whether the above agreemjent would not 
have the effect of excluding nationals of other countries from enjoy- 
ing the freedom of occupation; he understood that there were two 
Americans who were engaged in meat packing. He inquired whether 
they would not, on account of such formation of corporations, be 
obliged to discontinue their business. 

Mr. Hanihara replied that that was not the case at all. The 
Japanese would be placed on an equal footing with any foreigners 
of other nationalities. 

MACHINERY. 

Dr. Koo said that he understood that there was a great deal of 
machinery in the shipbuilding dockyards in Tsing-tao which had 
been temporarily removed to Japan. He wondered whether he could 
understand that they would come under class (6) of the public prop- 
erties. 

Mr. Hanihara said that he did not know, but, if they were taken 
away during the war, he wondered whether the Japanese Government 
had any obligation to return them. 

He then consulted with his secretaries and said that the ma- 
chinery was included under the head of class (b). 

MIXED COMMISSION, 

Dr. Koo said that both delegations had been speaking of estab- 
lishing some mixed body of appraisal and valuation in connection 
with the transfer of public properties. However, he thought that 
the discussion of that body would better be postponed, in view of the 
fact that that question had relation to various other questions to be 
dealt with later; for instance, the matters falling under paragraph 
8 of the Japanese note of September 7. 

Mr. Hanihara agreed. 



56 

OPENING OF TSINGTAO PORT. 

Mr. Hanihara said that the Japanese memorandum of September 
7 last stated: 

" § 2. The Japanese Government will abandon plans for the estab- 
lishment of a Japanese exclusive settlement or of an international 
settlement at Tsingtau provided that China eng:ages to open of its 
own acc^l the entire leased territory of Kiaochow as a port of trade 
and to permit to nationals of all foreign countries freely to reside 
and to carry on commerce, industry, agriculture, or any other law- 
ful pursuits within such territory, and that she further undertakes to 
respect the vested rights of all foreigners. China shall likewise 
carry out forthwith the opening of suitable cities and towns within 
the iProvin^ of Shantung for residence and trade of the nationals 
of all foreign countries. Eegulations for the opening of places 
under the foregoing clauses shall be determined by the Chinese 
Governfiient upon consultation with the powers interested." 

For the purpose of accelerating the discussion, he would take 
up the question of vested rights in connection with the opening of 
the portfr.- 

Dr. Koo said that he Avould be glad to hear the views of the 
Japanese delegation on that question. 

Mr. Hanihara explained that by vested rights were meant all 
rights lawfully acquired, whether during the German regime or since 
the Japanese occupation, which should be recognized and respected. 

Dr. Sze asked how Mr. Hanihara defined the term " lawfully ac- 
quired."' 

Mr. Hanihara said that he meant acquisition by ordinary lawful 
means. 

Dr. Koo then desired to hear further observations on the ques- 
tion from Mr. Hanihara. 

Mr. Hanihara said that the Chinese memorandum of October 5 
stated : " The vested rights of foreigners obtained through lawful 
processes under the German regime shall, of course, be respected, 
but those obtained by force and compulsion during the period of 
Japanese, military occupation and against law and treaties can in no 
wise be recognized." That would seem to intimate that some of the 
rights had been obtained by force and compulsion. But such was 
by no means borne out by facts. Payments were in each case made 
and willingly accepted by the sellers. If there were any evidence to 
substantiate that intimation, he would be glad to hear. 

Dr. Koo said that he would be glad to give the Japanese delegates- 
evidence concerning statements made in the note. But before pro- 
ceeding to discuss such details, it might be desirable to attenipt to 
arrive at some general principle. Of course, the statement did not 
preclude acquisitions during the Japanese occupation of properties 
by lawful processes. But he thought, for one thing, such land as had 
been requisitioned by Japanese military authorities for military 
necessities should be given back to Chinese owners. 

Mr. Hanihara said that records showed that no land had been 
acquired by the Japanese troops without paying the price. 

Dr. Koo said that the information of the Chinese delegation would 
seem to show that a great deal of landed properties were requisitioned^ 



57 

by the Japanese authorities at prices fixed arbitrarily by tliemselves 
without reference to the market prices, in some cases at from 35 
to 50 yuan per mow. 

Mr. Hanihara said that the Japanese information was entirely 
different from that. There was no instance of land purchased 
Tinder duress, and in every case price was paid to the seller which 
was satisfactory to him. When Germany took Kiaochow, land was 
bought at prices prevailing at the time of obtaining the leasehold, 
but the Japanese military authorities bought land at the market 
A^alue of the time. There was no question of coercion or compulsion. 
There were, indeed, a few people who agitated against the Japanese 
military authorities buying land, but, generally speaking, there was 
not much opposition. The price offered was willingly taken. In 
the Japanese civil office of Tsingtao there were records of all the 
purchase contracts of land. He thought the question concerning the 
purchase of landed properties could be adjusted by local settlement. 

Dr. Koo said that there might be properties lawfully acquired 
€ven during the Japanese occupation. Without trying to settle in- 
dividual cases, an agreement might perhaps be reached as to general 
principles. 

Mr. Hanihara said that he thought it was a sound suggestion. 
They could not enter into details here. Any agreement made here 
must necessarily be on general terms. 

Dr. Koo said that the vested interests acquired under the German 
regime would be respected, as a matter of course. As for those 
acquired during the period of the Japanese military occupation, they 
would be respected if it should be proved that they were acquired 
lawfully and equitably. 

Mr. Hanihara said that no reflection or intimation that there had 
been any unlawful acquisition could be allowed. 

Dr. Koo said that the question of vested rights acquired during 
the period of Japanese occupation might perhaps be better left to 
the discussion of the commissioners. He suggested that it would be 
better not to go into that question here. 

Mr. Hanihara said that he thought it would facilitate progress 
if it should be agreed on general terms that all vested rights should 
be respected, whether they were acquired under the German regime 
or during the period of the Japanese occupation, with the under- 
standing that matters of detail should be treated by the commis- 
sioners of Japan and China. Should it turn out that any of those 
properties were acquired unlawfully they could be treated accord- 
ingly by that commission. 

Dr. Koo said that he would submit a rough formula for con- 
sideration : 

" The vested rights of foreigners lawfully acquired under the 
German regime shall be respected ; and all claims in regard to vested 
rights acquired during the period of the Japanese military occupa- 
tion should be arranged by the Sino-Japanese Joint Commission. 
In case of dispute the matter shall be submitted to arbitration.'"' 

Mr. Hanihara said that he wanted to have it made clear that 
there was no intimation of unlawful acquisition durii;g the Japanese 
occupation. There was no reason to make distinction between the 
vested rights acquii"ed under the German regime and those acquired 
during the Japanese occupation so long as these were acquired 



58 

lawfully. He wondered why it could not be plainly stated that all 
vested ri<rhts of foreigners should be respected so that all possibility 
of misunderstanding might be avoided. Moreover, he did not agree 
to arbitration. He was for settling all differences between China and 
Japan themselves. 

Dr. Sze said that it was. of course, hoped that differences might 
be arranged in that way; only it was desirable that in case of clis- 
pute a way out should be provided for. 

Mr. Hanihara said he could not brook any arrangement which im- 
plied reflections upon Japan. 

Dr. Koo thought it was only natural that honest doubts might 
arise about certain matters. 

]Mr. Hanihara said, if commissioners of both Governments investi- 
gated the matter on tlie spot no serious difficulty could arise. 

Dr. Sze said that the Chinese proposition was only made to meet 
the possible contingenc}- of difficulty arising as to the practical settle- 
ment. 

Mr. Hanihara said that these details should be left to local settle- 
ment. Even if there should arise some difficulty it would not be 
anything like an international difference of a serious character. 

Dr. Koo said that they need not necessarily go to The Hague. 
Only a small international board would answer the purpose. 

Mr. Hanihara said that he did not like the idea of arbitration. 

Dr. Koo disavowed any desire on the part of the Chinese delega- 
tion to cast any reflection either upon the Japanese authorities or 
upon the Chinese claimants. 

Mr. Hanihara said he did not see why the Chinese delegation 
could not trust their own officials who would be called on to par- 
ticipate in the practical settlement. 

Dr. Sze said that should those commissioners fail to agree it was 
best to have provided means of arbitrating the difference. 

]Mr. Debuchi said that they were meeting here in a friendly spirit 
and that the desire for a speedy and satisfactory settlement was 
unanimous. He felt sure such minor details would be settled easily 
on the spot. He begged to express his hope that the Chinese delega- 
tion would remove from their minds the apprehension of eventual 
disagreement. He thought that unless the possibility of eventual 
disagreement were set aside for the moment the progress of the dis- 
cussion would be impossible. 

Dr. Sze said that the Chinese delegation wanted this settlement 
to be final. 

Mr. Debuchi said that even if they tried to settle questions of 
minor detail here, the necessary knowledge was not available. From 
his personal experience in Peking he felt sure that those small matters 
would be satisfactorily settled by the commissioners. 

Dr. Sze said that he saw no reason why the principle of arbitration 
should not be accepted by the Japanese delegation. 

Dr. Koo suggested that since they could not agree about the prin- 
ciple of arbitration they could only put aside this question of con- 
tingent dispute and arbitration. He desired therefore first to settle 
the question of general principles in dealing with the vested rights of 
foreign nationals in Tsingtao. He would suggest the following 
formula : 

" The vested rights lawfully and equitably acquired by foreign 
nationals in Tsingtao under German regime, or during the period 



59 

of the Japanese military occupation, will be recognized. All ques- 
tions relating to the status or validity of such vested rights shall be 
arranged by the Sino-Japanese Joint Commission. 

Dr. Koo,' continuing, said that there were certain obvious excep- 
tions to the above rule. The first of these exceptions was the salt 
industry in Tsingtao. It was hardly necessary to emphasize the 
importance to China of this particular industry. As Mr. Debuchi 
knew so well, salt Gabelle was one of the principal sources of revenue 
of the Chinese Government. 

Mr. Hanihara said that as to the salt industry in general he fully 
realized its importance to China. He knew full well that salt 
Gabelle formed the security of international loans, but he understood 
that salt produced in Tsingtao was set aside as surplus and was 
placed outside the monopoly system. Under the German regime 
license was given to private individuals for salt industry. Japan 
followed the same policy and granted licenses to Japanese capitalists 
in Tsingtao. The salt industry in Tsingtao grew remarkably in 
the hands of those Japanese. Two or three big corporations had 
been formed and considerable amount of capital was invested in the 
industry. Tsingtao salt was now being freely exported to Japan, 
which stood in great need of that article. As was stated above, 
the salt produced in Tsingtao stood by itself. In other words, it was 
treated separately from the produ^-ts of other parts of China and of 
the Shantung Province. The Chinese Government once tried in 
vain to extend the monopoly system to the salt i'ndustry in Tsingtao. 

Dr. Koo asked Mr. Hanihara if he was speaking of the conditions 
prevailing during the Japanese occupation. 

Mr. Hanihara answered that what he stated applied as well to 
the period before the Japanese occupation. So far as he could see the 
salt industry of Tsingtao did not affect the monopoly system of the 
Chinese Government in any way whatever, while to the Japanese 
it was of such great importance and the rights and the interests of the 
Japanese were involved to a ver}^ great extent in the industr3^ 

Dr. Koo said that the conditions prevailing under the German 
regime and the actual needs of the Chinese Government must be 
considered separately. 

Mr. Hanihara said that there had not been much salt industry 
before the Japanese occupation. It went without saying that in 
leaving the industry in the hands of the Japanese a reasonable ar- 
rangement was, of course, to be made with the Chinese Government. 

Dr. Koo said that his figures showed that under the German 
regime 84,000,000 pounds of salt was annually produced by the Chi- 
nese, while the yearly production by the Japanese amounted to 
270,000,000 pounds. The very fact that the salt industry in. Tsingtao 
grew to such proportions must be taken as an additional reason why 
it should be amalgamated into the general salt industry of China. 
The Japanese authorities were levying a tax of 4 yen per ton upon 
Tsingtao salt. Thus quite a considerable revenue was involved in 
the question. 

Mr. Hanihara said that it was because of the Japanese control that 
the salt industry had developed so much in Tsingtao. The failure 
of the Chinese Government to extend their monopoly system to 
Tsingtao was, he was told, 013. account of the opposition of the 
Chinese people of Tsingtao. In desiring to protect the interests of 



60 

the Japanese capitalists the Japanese Government were not doing 
anything that wouki encroach upon anybodj^'s rights. 

Dr. Koo said that the Chinese tielegation could not see their Avay 
to make any concession so far as the question of taking over the salt 
industry was concerned, but if that principle was recognized they 
were disposed to entertain any reasonable suggestion about the ex- 
portation of salt to Japan. 

Mr. Hanihara said that the Japanese authorities had granted salt 
licenses on the strength of the privilege which they succeeded to 
from the Germans. The interests of the Japanese nationals had thus 
been lawfully acquired and the Japanese Government felt in duty 
bound to do their best to protect those interests. If the recognition 
of those interests were to be detrimental to the national interests of 
China, the question would be different, but, as pointed out before, the 
salt industry in Tsingtao was outside the monopoly system of China 
and whatever was done with it would in no way encroach upon that 
system. Moreover, the salt industry in Tsingtao had been built up 
entirely by the Japanese, and the question was therefore about some- 
thing which China had not possessed before. Of course, in having 
the industry allowed to the Japanese everj^thing possible would be 
done to conform to the laws and regulations of China. 

Dr. Koo said that apart from the question of the industry itself 
the Chinese delegation were entirely disposed to consider any sug- 
gestion about the exportation of salt. 

Mr. Hanihara said that he could not yield. The interest of the 
Japanese was so vitally involved in the inclustry, while its importance 
to China was not so great. 

Dr. Koo said that if the salt industry in Tsingtao was kept by 
Japanese operators it would not be fair for salt industry in other 
parts of China to have to compete with the protected industry in 
Tsingtao. 

Mr. Hanihara said that it was not at all suggested that Tsingtao 
salt should be exported to other parts of China. The exportation 
was strictly to be confined to Japan alone. 

Dr. Koo said that that latter point might be met by making some 
arrangement, after the industry had been taken over, whereby a cer- 
tain amount of salt should be annually exported to Japan. The need 
of salt monopoly could not be impressed too strongly upon the Japa- 
nese delegation. He hoped that they would not press for something 
which no other nationals possessed in China and which would inter- 
fere with the monopoly system of China. 

Mr. Hanihara wished to point out once more the fact that the salt 
industry in Tsingtao had never been the source of Chinese revenue, 
and that China now proposed to take away what others had built up. 
He didn't think it fair at all. 

Dr. Sze observed that he should like to mention some cases where 
salt was found along the Shantung Kailway as far as the city of 
Tsinan-fu. 

Mr. Hanihara answered that he didn't know anything about that, 
but that the Japanese Government would go to any extent in pre- 
venting the smuggling of salt. 

Mr. Debuchi remarked that as to smuggling there was concluded 
an agreement in March, 1919, between the Japanese consul general 
at Tsinan-fu and the Chinese salt administration, whereby a certain 



61 

amount of salt was permitted to be transported westward from the 
leased territory. The smuggling stopped since then. The eastern 
district of Shantung Province had always been placed outside of the 
purview of the salt Gabelle. Sir Richard Dane wanted to have that 
district under his administration, and, in fact, he sent some officials 
to Shantung with that end in view, but the people of Shantung re- 
volted and there was actually a riotous demonstration against the at- 
tempted amalgamation. For thousands of years this eastern side 
of Shantung had been regarded as outside the monopoly system. The 
native salt had always been exported to Korea and Manchuria by 
junks. That was the most prominent feature of the salt industry of 
this particular district of Shantung. The Japanese delegation appre- 
ciated the position of the Chinese representatives in regard to the 
need of a uniform monopoly system, but the particular aspect of the 
Shantung salt industry just mentioned and the interests of the 
Japanese, who had built up that industry, should be taken into 
consideration. 

Dr. Koo said that he understood that under the German regime the 
salt industry had been carried on by the Chinese. 

Mr. Hanihara said that even now there were many Chinese who 
were engaged in that business. 

Dr. Koo admitted that, but he said they formed a decided minority. 

Mr. Debuchi said that in 1914, 1,779 Japanese acres of salt field 
were worked by Chinese, and that it had now increased to 2,078 acres, 
while the Japanese were working only 1,024 acres. 

Dr. Koo said that according to his figures for 1919, 8,133 Japanese 
acres belonged to the Japanese and 250 Japanese acres to the Chinese. 
Mr. Debuchi had spoken of the exceptional situation in Tsingtao, but 
the fact must be recognized that Japan was insisting upon having 
something which other treaty powers did not enjoy. In taking over 
the salt industry, fair compensation would, of course, be given, and, 
moreover, suitable arrangements would be made for the exportation 
of salt to Japan. He hoped the Japanese delegation would reconsider 
the matter. 

Mr. Hanihara said that it was difficult for him to bring himself 
to accept the Chinese viewpoint. There was no question of exclusive 
rights for the Japanese. Japan did not object to any other foreign 
nationals engaging in the industry in Tsingtao. Even under the 
German regime all foreigners alike had the right to engage in the 
business, but foreigners did not go into the business those days. All 
Japan requested was to have the rights and interests built up by the 
Japanese respected. All intention to carry salt into the interior of 
China had been disavowed. The Chinese delegation were asking 
something which they could not reasonably expect to have if they 
faced facts as they were. 

Dr. Koo said that it would be different if the question were of an 
ordinary industry. 

Mr. Hanihara said that the salt industry in Tsingtao stood upon 
enitrely different footing from that in other parts of China. 

Dr. Koo said that the facts and conditions under the German 
regime could not well be taken as the basis of discussion. It must 
be remembered that now the leasehold was to be returned ta China. 

Mr. Hanihara said that the leasehold was, of course, to be returned, 
but vested rights were another question. But for the very great 
93042—22 5 



62 

importance of this industry to the Japanese people he would not be so 
insistent. 

Dr. Koo said that if it were an ordinary industry there would be no 
difficulty. 

Mr. Hanihara said that there had been no salt industry in Tsingtao 
before. It was the Japanese who had built it up. 

Dr. Koo said that the need of China's Government monopoly must 
be considered. 

Mr. Hanihara said that that Government monopoly set aside the 
Tsingtao salt as surplus. 

Dr. Koo said that it was a condition which prevailed for centuries 
before salt monopoly came into operation in China, before there was 
any Government monopoly in Japan either. 

Mr. Hanihara admitted that the condition prevailed for centuries,, 
but the Chinese Government did not succeed in its recent attempt to 
extend the monopoly system to the district of Tsingtao. 

Dr. Koo said that it was only an imperfection in the system which 
it was not desired to perpetuate. 

Mr. Hanihara pointed out that it was a private industry — no Gov- 
ernment could take away arbitrarily the interests of private indi- 
viduals legitimately acquired. 

Dr. Koo said that it would be agreed that all Governments could 
take up private industry for monopoly. 

Mr. Hanihara said that Dr. Koo was talking about a normal con- 
dition of things. Japan proposed to restore Kiaochow, for the acqui- 
sition of which she had paid so large a sacrifice. In restoring it she 
now proposed to retain for her nationals things which would not 
injuriously aifect the national interests of China, but which were so 
vitally important to the Japanese people. If it was proposed that 
Japan should give up everything found within the leased territory, 
there would be no need of her representatives coming here to nego- 
tiate about the matter. 

Dr. Koo said that throughout the course of tlie conversations the 
willingness of the Chinese delegation to meet the Japanese demand, as; 
far as they might, ^^'as well demonstrated, but here opinions of both 
sides differed so widely. 

Dr. Sze said that the Chinese delegation had offered to make ar- 
rangements for the annual exportation of a certain amount of salt tO' 
Japan, because they wanted to meet the Japanese viewpoint. They 
knew that salt was needed by Japan and that money had been spent 
bv the Japanese in the industry. 

'Mr. Hanihara said he hoped that his Chinese friends would give 
further consideration to this matter. 

Dr. Koo said that salt monopoly had been adopted in China for 
centuries. It was hard to recognize an exception, not only for the 
Japanese but for any ofher foreign nationals. 

Mr. Hanihara said that the application of any law varied with 
the actual circumstances. He thought there was nothing unreason- 
able in the Japanese demand. It was true that China had a monopoly 
system for centuries, but that system had never applied to the eastern 
district of Shantung. Moreover, the Japanese had not encroached 
upon anybody's rights. They merely wanted the continuance of 
their present position. It might be different if it was proposed to- 



63 



create new exceptions, but it was just the continuation of an excep- 
tional condition which had always existed. He hoped that the Chi- 
nese delegation would reconsider theio* position. 



PRESS COMMUNIQUE. 



It was decided that the press communique for to-day be issued in 
the annexed form (Annex I), 

The meeting adjourned at 5.30 p. m. The next meeting will be 
be held at 3.15 p. m. to-morrow. 

Washington, D. C, December 9, 1921. 



SJC-8.] 

Annex I, 



December 9, 1921.. 



[For the press.] 

The Chinese and Japanese delegates met in the governing board 
room of the Pan American Union Building at 11 o'clock this morning 
and 3 o'clock this afternoon. The discussion on public properties 
was completed. The question of opening the port of Kiaochow was 
taken up, and the salt industry at Tsingtao was then discussed. The 
meeting adjourned until 3.15 to-morrow afternoon. 



NINTH MEETING. 

The ninth meeting, held in governing board room, the Pan Ameri- 
can Union Building Washington. D. C., at 3.15 o'clock in the after- 
noon of Saturday, December 10, 1921. 

PRESENT. 

China. — Dr. Sao-Ke Alfred Sze. Dr. V. K. Wellington Koo. Dr. 
Chung Hui Wang. Secretaries : Mr. Tsai, Mr. Tung-Fan Hsu. Mr. 
C. H. Zee, Mr. Chuan Chao. Mr. Telly Howard Koo. 

Japan. — Baron K. Shidehara, Mr. M. Hanihara, Mr. K. Debuchi. 
Secretaries: Mr. S. Saburi, Mr. E. Kimura, Mr. H. Saito, Mr. T. 
Shiratori. 

Also present as observers : 

The United States of Avier'ica. — Mr. John Van A, MacMurray, 
Ml|;Edward Bell. 

^i,(< British Empire. — The Right Hon. Sir John Jordan, G. C. I. 
E.. K, C. B.. G. C. M. G. ; Mr. M. W. Lampson, M. V. O. 

Dr Sze said that it was with great pleasure that he saw Baron 
Shidehara well again. He wished him continued good health. 

Baron Shidehara thanked for the kind expressions of Dr. Sze, and 
said that he was very much pleased to come to the meeting. He was 
unable as yet to take an active part in the discussions, but he was 
glad to be with his friends. 

SALT QUESTION. 

Mr. Hanihara asked whether the question of salt should be taken 
up before that of the railway. He had given a careful consideration - 



64 

to what the Chinese delegates had stated the day before. He was. 
however, unable to alter his position. It was his earnest hope that 
some means of adjustment should be found. If they did not do 
their best to that end, they would not be faithful to their duty. As 
he sincerely desired to give further consideration to the Chinese 
proposition, he wished that the Chinese delegates would once more 
state their position in as concrete a form as possible. 

Dr. Sze said that, to summarize again the Chinese position in a 
concrete form, it was: (1) That a certain amount of the salt pro- 
duced in Shantung, being required by Japan, he and his colleagues 
were prepared to meet the Japanese wish in that respect to the full- 
est extent possible; (2) that the investment made by the Japanese 
in the salt enterprise would be fairly and equitably compensated for. 
He and his colleagues had no intention to injure the interests of the 
Japanese in the salt industry. These were the essential points. If 
the salt industry were an ordinary business enterprise, he should not 
see much difficulty in conceding to the Japanese point of view ; but, 
it being under Government monopoly in China, it was desired that 
all parts of the country should be placed under the same unified 
system. 

Mr. Hanihara inquired whether he was correct in understanding 
that the Chinese proposal was, first, that China, realizing the need 
of salt in Japan, was prepared to export a certain amount of that 
article; and secondly, that proper compensation would be given for 
the investment by the Japanese. In order that the Japanese delega- 
tion might be enabled to give a close and careful consideration to 
the Chinese proposal, he would like to get a little more concrete idea 
as to the manner in which the compensation was proposed to be made. 
If Dr. Sze had any specific plan, he and his colleagues would be ready 
to give it special consideration. 

Dr. Sze stated that, as to the question of fair compensation, it was 
necessary to have some local knowledge which the Chinese delegation 
lacked. It would, therefore, be best to leave the matter to the in- 
vestigation on the spot. It would not be fair to go into details without 
local information. It was therefore proposed that they set aside 
the question of details and try to see whether they could not agree 
on general principles. 

Mr. Hanihara said that he could not commit himself to anything 
apart from what he had said the day before. However, he was pre- 
pared to give further consideration to the matter with a view to 
working out some suitable arrangement. The salt question was a very 
important one. He and his colleagues were quite prepared to give 
full consideration to any Chinese suggestion. 

Dr. Sze inquired whether he could get some idea as to the amount of 
salt Japan might want. 

Mr. Hanihara replied that, unfortunately, the Japanese delegation 
had no actual figures. 

Dr. Sze inquired whether it was the wish of the Japanese delega- 
tion to discuss the question some other day. 

It was agreed that the question of the salt industry should be left 
in abeyance and that the question of the railway should now be 
taken up. 



65 



RAILWAY. 



Mr. Hanihara said that in respect of the railway question, the 
Japanese delegation had made their position clear at a previous 
meeting. It had also been clearly stated in the Japanese memorandum 
of September 7. The question was one of the greatest, and perhaps 
the most difficult of all the questions with which they had to deal. 
First of all, the Japanese delegation desired to hear the Chinese 
proposition in full, so that they could give careful consideration 
to the matter. 

Dr. Sze suggested that they took one phase of the ciuestion first in 
order that an agreement might be easily reached. China had for 
years tried to unify her railwaj^ sj'stem — the system of accounts, of 
rolling stock, of the construction of bridges, and of other equipments. 
If each separate railway had separate administration, greater ex- 
penditure would be incurred in its construction and operation. It 
would be necessary to charge higher fares to passengers and higher 
*freight on cargoes. Such was the reason why China had gradually 
come to adopt a_unified system., That was one of the principal 
reasons why he and his colleagues found it difficult to accede to the 
Japanese proposal of a joint arrangement. The unified system would 
otter cheaper service to passengers and freight in the long run. That 
was the underlying motive .in which the Chinese proposal was con- 
ceived. It was therefore earnestly desired that Japan would not 
insist on the joint system. 

Mr. Hanihara said that he had for the present no comment to make 
upon what Dr. Sze had just said. He would like to base all discus- 
sions on a concrete proposition ; he would like to discuss the question 
as a whole, because it was very difficult to consider any special phase 
by itself. 

Dr. Sze said that if this question of principle was agreed to by the 
Japanese delegation it would afford great facility to the Chinese 
delegation, inasmuch as they could frame their proposal on the basis 
of that principle. 

Mr. Hanihara said that that was exactly the point which it was 
not easy for the Japanese delegation to meet. He admitted that the 
question of uniform railway system was of first importance from the 
viewpoint of the Chinese delegation, but he wanted to emphasize the 
fact that what they were concerned about here was the settlement 
of the Shantung Eailway. It was therefore desired that the whole 
proposition in regard to that settlement should be offered by the 
Chinese delegation. 

Dr. Koo observed that until they had come to an agreement on 
general principle it would not be of much help to discuss detail. 
At the same time, it might be said on behalf of the Chinese delega- 
tion that they desired to manifest the same measure of fair and 
reasonable spirit on this question as had been shown in previous dis- 
cussions, and that, therefore, they would be prepared to consider 
reimbursing Japan to the extent of half of the total value of the 
railroad on condition that Japan agreed to transfer the Shantung 
Railway to China, to be controllecl and managed bv the Chinese 
Government as part of the Government railway. iTe also desired 
to point out that that proposal of the Chinese delegation had been 
offered so that the wishes of the Japanese Government to have a half 



interest in the railway mioht be met. He said that he appreciated 
the usefulness of joint enterprise in general in China, but on this 
l^articular question the position of the Chinese Government was quite 
difficult. There was no way for them to depart from the settled 
policy of railway unification. He did not wish to convey any idea 
that he was trying to impose anything at all. He w^as merely trying 
to make clear the extreme necessity for China to have all her railways 
completely restored to the control of the Government. 

Mr. Hanihara desired to ask a question for his personal enlighten- 
ment: What did the Chinese delegation mean when they said that 
they were prepared to reimburse Japan to the extent of half of the 
total value of the railway? 

Dr. Koo replied that the total property of the railway and its 
appurtenances would be fairly valuated, wherefrom would be de- 
ducted such sum as represented the shares that were held by the 
Chinese. Such shares represented a very small sum. After that 
deduction the sum would be divided in half and one-half would go 
to Japan under the Chinese plan. The Chinese delegation M^ere 
prepared to reimburse Japan to that amount. 

Mr. Hanihara understood that the first step would be the valua- 
tion of the entire railway property. He wondered whether Dr. Koo 
included the mines among the appurtenances to be valuated. 

Dr. Koo said that originally these mines were attached to the rail- 
wa3% but later they were operated by the Shantung Mining Co. 
But other appurtenances, such as stations, etc., belonged to the rail- 
way. 

Mr. Hanihara stated that apparently the Chinese delegation at- 
tached great importance to the railway itself. He wondered whether 
the intention of his Chinese friends was to deal with the mines 
separately. 

Dr. Koo said if the Chinese delegates could have assurance as to 
the railway itself, if the control and the management of the railway 
were altogether to be turned over to China, then in consideration of 
that assurance he and his colleagues were prepared to entertain any 
suggestion the Japanese delegation might make as to the mines. 
However, he did not wish to commit the Chinese delegation on that 
point. 

Mr. Hanihara said that if he had understood his Chinese friends 
correctly, something was said about the branches of the railway. He 
desired to know Avhether by them were meant branches leading to the 
mines or such lines as the Kabmi-Shunteh Railway and the Yentai- 
Weihsien Railway. 

Dr. Koo said that he did not mean to include these extensions the 
construction of which he understood had not yet been started. 

Mr. Hanihara said that he was not yet quite clear about the Chinese 
idea as to the valuation of the railway itself and of the half of 
the value China proposed to pay to Japan. He desired further 
explanation. 

Dr. Koo wondered whether he could make the Chinese position, 
any clearer, but he would try. The idea of reimbursement had really 
been designed to meet the Japanese point of view, in substance, inas- 
much as the Chinese delegation were disposed to make payment of 
the equivalent of half of the total value of the railway. In doing 
that China was really giving Jaj)an the substance, so to speak, of 



67 

what she had been seeking in advancing the proposal of the joint 
undertaking. With that the Chinese delegation asked that the whole 
line should be owned and operated as the Chinese Government rail- 
way. 

Mr. Hanihara inquired whether the Chinese proposition was to 
allow the Japanese to have interests in the railway to the extent of 
half of its value. 

Dr. Koo said that the proposition was to compensate Japan. To 
use a common phrase, China would " buy out " the Japanese interest 
in the enterprise. 

Mr. Hanihara inquired as to the method of valuating the total 
property. 

Dr. Koo replied that the Chinese delegation were not yet prepared 
to give any practical plan. He wondered whether the Japanese dele- 
gation had any idea in that connection. 

Mr. Hanihara replied that Japan had her ov^n plans as to the 
method of valuation to be applied when the Japanese proposal was 
accepted, but he did not desire to complicate the matter by stating 
them at that moment. He desired to know the Chinese plan. 

Dr. Koo said that that was a question of procedure. He preferred 
an agreement on the principle first, which would make the matter of 
procedure susceptible of easy solution. 

Baron Shidehara at this point desired to ask a question of Dr. Koo. 
There was some phase of the Chinese proposal which was not quite 
clear to him. It was proposed that a valuation should be taken of 
the whole railway properties, and that half of the value should be 
paid to Japan. Suppose the total value of the railway amounted to 
20,000,000 yen. It would seem that according to the proposal of 
China she would have to pay to Japan only 10,000,000 yen in order 
to acquire the whole railroad, while Japan, by an arrangement with 
Germany, was to credit the whole value of the railway to the German 
reparation account. Thus she would have to pay 20,000,000 yen, 
while getting only 10,000,000 yen from China. Far from getting 
anything, Japan would simply lose 10,000,000 yen. He wondered if 
the Chinese proposition would not lead to that conclusion. He won- 
dered if that was not the idea of the Chinese proposition. 

Dr. Koo said that the statement of Baron Shidehara called for fur- 
ther observation as to the original idea of China in making the 
present proposal. The Shantung Railway was situated almost en- 
tirely in the Chinese territory with a very small section in the leased 
territory of Tsingtao. The Chinese Government had always taken 
the position that the occupation by the Japanese troops had not given 
any title to Japan in respect to the railway. If the railway was to be 
taken as a prize of war, it should have gone to China, within whose 
territory it was situated. In the Japanese proposal of September 7 
the plan of joint undertaking was suggested. Japan desired to have 
half interest. China was not prepared to accept that proposal, but 
to meet the wishes of Japan she would pay half of the total valuation. 

Baron Shidehara said that that was the point he did not quite 
understand. If China was going to take over the whole property, it 
was only reasonable for her to pay the whole value. He did not see 
why Japan should be called upon to pay half of that value. 

Dr. Koo inquired whether Baron Shidehara meant that Japan had 
to pay for the railway. 



68 

Baron Shidehara replied that the matter aa^s in the hands of the 
reparation commission in Paris. Japan would most probably have 
to pay to Germany somethincr like 

Mr. Debuchi supplied the figures as being 30,000,000 yen. That 
arrangement had been made tentatively by the reparation commission. 

Baron Shidehara, continuing, said that the Chinese idea was that 
Japan should give everything over to China and pay. Avithal. half 
the value of the whole railway. 

Dr. Koo said that the Japanese Government had the advantage of 
being kept informed as to the execution of the treaty of Versailles. 
The proposal of the Chinese Government was based upon the situa- 
tion before that treaty was signed. He had thought that the question 
whether that railway was of a private or public nature had not yet 
been decided. The jjosition of Japan, he understood, had been to 
jegard the railway as a legitimate priae of Avar, but that' the point 
had been left open. Now, he found that Japan had to pay for the 
railwa}", and on that account China might have to change her po- 
sition. 

Baron Shidehara said that apparently the Cliinese delegation based 
their proposal on the assumption that Japan had acquired the rail- 
Avay properties Avithout paying anything for them. 

Dr. Koo said that he had thought the dis ussion at the peace confer- 
ence had been conducted on that basis. If the railway was to be 
treated as a prize of the Avar, it was felt that the railway, being 
situated in the Chinese territory, no country would be more entitled 
to it than China. 

Baron Shidehara said that the situation was quite clear to him 
now. He thought at first that Japan would have to pay 30.000,000 
yen to Germany, as had been tentatiA^ely agreed with that country, 
while she would get from China only 15.000,000 yen. He should 
suppose that the Avhole Chinese proposal would now have to be modi- 
fied. He Avondered AA'hat that modified proposal might be. 

Dr. Koo said that the offer of the Chinese GoA^ernment to pay. as 
compensation, half the A'alue of the railwaA% minus the amount of such 
shares as Avere held by the Chinese, had been designed to meet in 
substance the point of view of the Japanese Government as expressed 
m their note of September 7. In other words, the proposal had been 
made with the best of intentions in order to meet in substance the 
Japanese suggestion of joint enterprise without compromising the 
position of the Chinese Government as to the question of principle. 

Baron Shidehara said that obAdously the Chinese delegation had 
been laboring under some misunderstanding. When Japan proposed 
joint enterprise the idea Avas that, if accepted, Japan would, of 
course, haA^e to bear the burden of the payment to Germany in equal 
shares with China. The Chinese proposal was that the whole rail- 
way should be taken over by the Chinese Government. Japan would 
now haA^e to pay Germany alone, it having been agreed that the 
Shantung Railway was a private undertaking. 

Dr. Koo asked if under the Japanese plan it was not intended that 
half of the A^alue of the railway should be offered to China. 

Mr. Hanihara said that the Japanese proposal might be stated 
thus : Suppose the total value of the railway amounted to 50,000,000 
yen, then China would put up 25,000,000 and Japan the other 
25,000,000, thus making the whole enterprise a half and half affair. 



69 

If for the railway Japan had to pay 30,000,000 yen, it was, under 
that arrangement, up to China to pay 15,000,000 yen. He wondered 
if, in making the proposal that China should take over the whole rail- 
way property after paying to Japan half its value, China was 
prepared to pay 30,000,000 yen herself to Germany ; or if it was the 
idea of the Chinese Government that Japan should still make that 
payment alone and lose instead of gain anything from the settlement. 

Dr. Koo said that the Chinese proposition had been based on the 
assumption that Japan had nothing to pay for the railway. That 
point was now made clear to him by the ambassador's statement. 

Baron Shidehara asked if there were an/ Chinese shareholders. 

Dr. Koo said that there had been 300 original Chinese shares be- 
sides 60 shares which had been subsequently acquired by Chinese, 
and that the amount of each share was 1,000 marks. 

Baron Shidehara explained that there was an arrangement whereby 
the German Government was to pay for individual shares. It had 
been agreed that Germany should hand over to Japan a clean prop- 
erty without any strings attached to it. He understood there were 
some shares which were owned by other oiationals. 

Dr. Koo said that the Shantung Eailway shares were unregistered 
shares and that perhaps there might be some more shares which had 
come to the possession of Chinese without the fact being recorded. 

Baron Shidehara said that these shares would have to be redeemed 
by the German Government. 

Dr. Koo asked if the redemption of all these shares was to be left 
to Germany. 

Baron Shidehara answered that it was the case. He added that he 
wanted to correct himself on a minor point. It was at the repara- 
tion committee instead of between the Japanese and German Gov- 
ernments that the arrangement regarding the Shantung Railway 
had been made. 

Dr. Koo said that he appreciated the fact that the information 
just given to him necessitated some alteration in the Chinese pro- 
posal. As had been stated by his colleague. Dr. Sze, the Chinese 
delegation were desirous to meet the Japanese viewpoint in a fair 
and reasonable spirit and they were therefore prepared to reimburse | 
the total value of the Shantung Eailway on the conditions already 
mentioned. It might be stated as a corollary to that new proposal ' 
that out of the total value of the railway should be deducted such 
amount as represented the surplus profit of the railway for the past 
few years. He wished to add that, in order to simplify the process 
of accounting, the amount of railway shares owned by the Govern- 
ment and private individuals of China might be deducted from the 
total valuation. The amount represented by those shares was at any 
rate a small matter. 

Baron Shidehara said that the whole proposal seemed to him to 
amount to this, that Japan was to get nothing. It was proposed that 
China should pay Japan the whole value of the railway, but Japan 
had to pay that to Germany. The result would be that Japan would 
have no share, no interest whatever in the railway. China would 
take everything. 

Dr. Koo said that China understood that Japan had taken posses> 
sion of the railway to prevent its being used by the Germans, and 
that she was holding it with a view to its eventual restoration to 



70 

China. He wondered if Baron Shideliara was not referring par- 
iicuiarly to the- suggestion tliat profit from the railway should be 
deducted. ' 

liaron Shideliara said that it was not that alone, Japan was not 
getting any benefit at all according to the Chinese plan. 

Dr. Koo admitted it Avas true. It was possible China had miscon- 
strued Japan's purpose in taking possession of the railway. It had 
been thought that J apan had occupied Tsingtao and taken possession 
of the railway to prevent their being used in such a way as to endan- 
ger our position. It had not been supposed that desire for material 
benefit had been part of iier purpose. 

Baron Shideliara said that, apart from the political phase of the 

question, the fact was plain that Germany had property rights in 

Tsingtao and that she had agreed to transfer those property rights to 

,'Japan. The property was now Japan's, but Japan had to pay for it 

I because it had been agreed that the railway was a private enterprise. 

Dr. Koo explained that when he suggested the profit for the last few 
years might properly be deducted from the whole value of the rail- 
way he did not know whether there was any profit at all. He merely 
thought that it was a reasonable suggestion. He was yet to be in- 
formed on that point. 

Baron Shideliara said he did not possess any information as to 
the profit or loss, as the case might be. He wanted to mention, how- 
ever, that it was his impression that the Japanese Government had 
sent railway experts and officials and that their salaries had been paid 
out of the Government treasury. 

Dr. Koo said that the matter of salaries paid to these railway offi- 
cials and employees would not be difficult to adjust. 

Baron Shidehara said that he might add that besides the 30,000,000 
yen, which Japan would most probably have to pay to Germany, she 
had also invested large sums of money in the railway. When she had 
taken possession of it, the railway had not been in working order. 
He did not know to exactly how much those investments might 
amount. . 

Dr. Koo asked if those investments had been made out of the Gov- 
ernment treasury or from the profits of the railway. 

Baron Shidehara said that he had no exact figure. 

Baron Shidehara, continuing, said that one of his colleagues was 
under the impression that part of the investment had been defrayed 
out of the Government treasury and part from the profit. 

Dr. Koo asked if he could be informed whether there was any 
profit for the last few years. 

Baron Shidehara said that actual figures were not available. He 
was glad that this meeting had very much clarified the situation. 
There was much misunderstanding, at any rate, on the part of the Chi- 
nese delegation. 

Dr. Koo hoped that that clarification would lead to a speedy solution 
of the question. 

Dr. Sze said he should like to hear Baron Shidehara's opinion about 
the second proposal of the Chinese delegation. 

Baron Shidehara said that he had no suggestion to offer at present. 
It seemed to him, however, that the second proposal was, if anything, 
worse than the first. Under the first proposal Japan would get at 
least half the amount of the whole value of the railway, while she 



71 

would not be getting anything under the second proposah Moreover, 
it was proposed that the revenues of the railway for the past few years 
should be given up. The second proposal was really less favorable 
from Japan's standpoint. 

Dr. Koo said that if so the responsibility lay more with the repa- 
ration commission than with the Chinese delegation. 

Dr. Sze said that the first proposal had been made to meet in sub- 
stance the Japanese proposal of joint enterprise. 

Baron Shidehara said that if the Chinese proposition was a reply 
to the Japanese proposal, he did not see why only half of the whole 
value of the railway should be offered. He understood, however, 
that the proposition had been based on a misunderstanding. 

Dr. Sze said that in the interest of a speedy settlement C hina had 
offered to pay at once half the amount which had been mentioned 
in the Japanese proposal; but that, finding out that the offer had 
heen based on a wrong assumption, they now offered the amount of 
the whole value. 

Baron Shidehara said that the whole situation was now clear; 
that he was glad to hear that the first proposal of the Chinese dele- 
gation had been based upon a misunderstanding. He hoped that 
his Chinese colleagues would reconsider their counterproposal and 
that their new proposal would not go to much worse than the first. 

Dr. Sze asked if it was intimated that the question of principle 
advanced by the Chinese delegation was to be recognized. 

Baron Shidehara said that he did not mean to say as much as 
that. He desired to make sure of the 'meaning of the Chinese pro- 
posal. The first step in any discussion was the complete understand- 
ing of the question at issue. He wished fully to understand the 
Chinese point of view; he came here with no preconceived idea. 
He did not come here to make any proposal. His mind was open 
to any reasonable suggestion. 

Dr. Koo said that the second proposition of the Chinese delegates 
might be worse to Japan, but that would cost China twice as much 
as the first offer. 

Mr. Hanihara said that the Japanese delegation could produce the 
figures for the revenue of the railway. As for the expenditure, he 
could positively state that it had been defrayed by the central treas- 
ury of Japan. 

Dr. Koo inquired whether the revenue might be regarded as sur- 
plus profit. 

Mr. Hanihara replied that that represented only the gross reve- 
nue and was by no means to be taken as surplus profits. 

Dr. Koo said that that might be the case, but that there would be 
no difficulty in finding out the amount of the exact surplus profits. 

Mr. Hanihara said that the Japanese system of accounts was en- 
tirely different. 

Dr. Koo said that that was merely a question of accounting. The 
figures could perhaps be easily ascertained. If his Japanese friends 
would agree to the principle advanced by the Chinese delegation, 
that would help them a good deal. The details could be discussed 
at later meetings. 

Mr. Hanihara said that what he wanted to have from his Chinese 
colleagues was a concrete proposal. As Baron Shidehara said, the 
Japan'ese delegation had only been trying to clearly understand the 



• 72 

Chinese standpoint. He was e:lad that the baron had pointed out 
the misunderstanding: on which the Chinese proposal had been based. 

Dr. Koo said that the misunderstanding was costly to China. 

Baron Shidehara said that that Avould be no reason Avhy Japan 
should bear the cost of that misunderstanding. 

Mr, llanihara desired that the Chinese delegates would present 
their proposal in writing, in a concrete form. Not that the Jap- 
anese delegation tried to bind the Chinese delegates in any way, but 
simply it was thought advisable to avoid any misunderstanding. 

Dr. Koo said that if the principle was decided upon, the Chinese 
delegates would be glad to present their concrete proposition. That 
would really facilitate the discussion. He would ask his Japanese 
friends not to leave this meeting without leaving a " milestone,'' to 
use the words of Secretary Hughes that morning. 

Baron Shidehara said that he Avould approach the question from 
the practical rather than the theoretical standpoint. He desired to 
have a more concreate plan than that Avhich had already been of- 
fered. The new Chinese suggestion was Avorse than the original, 
and by no means acceptable. He desired the Chinese delegates to 
reconsider the matter. 

Dr. Sze said that in the discussion of public properties, the course 
folloAved was to agree on the principle first. If the Japanese dele- 
gation could see their way to adopt that system and tentatiA^ely 
agree upon the principle in respect of the railway also, that Avould 
facilitate the discussion in a large measure. He would feel very 
optimistic about the outcome of the deliberations. 

Mr. Hanihara stated that the principle inA'olved in the present 
question would seem to be Avhether the system of joint enterprise was 
to be adopted or not. In discussing the principle, it was necessary 
to ascertain all detailed points. 

/ Dr. Koo said that the principle China had noAv proposed was a 
[principle of full compensation of the whole property. 

Mr. Hanihara said that he hoped that the Chinese delegation 
would understand the Japanese position. He and his colleagues 
had already expressed their readiness and willingness to consider 
any proposition that they might make, apart from the Japanese 
proposition. The Japanese delegation. hoAVCA^er, Avere not prepared 
to giA^e up their position. In the meantime, the Japanese delega- 
tion Avould be glad to receiA^e any further proposition with a view 
to finding a means of adjustment. They should be in a form, con- 
crete, sound, and practical. If the Chinese delegation insisted upon 
discussing the principle, the Japanese delegation could not give up 
the idea of joint undertaking. 

Dr. Koo said that he could assure the Japanese delegation that 

I they would not be placed in any worse position. The Chinese propo- 

'sition was to pay for the whole property, not half, as preAdously. 

He desired that the merits of the modified proposition should be 

recognized. 

Mr. Hanihara suggested that the meeting should now adjourn. 
He added that, if he was not asking too much, he would like to have 
the substance of the Chinese proposition in writing, so that they 
might have a useful discussion at the next meeting. 

Dr. Koo said that the Chinese delegation would be very glad to 
do so. 



73 

The press communique was agreed upon (Annex I) and the meet- 
ing adjourned at 5.30 p. m., until 3.15 p. m., next Monday. 
Washington, D. C, December 10, 1921. 



SJC-9.] 

Annex I. 
[For the press.] 



December 10, 1921. 



The ninth meeting of the Chinese and Japanese delegates relative 
to the question of Shantung took place in the governing board room 
of the Pan American Union Building at 3.15 this afternoon. The 
question of salt fields and that of the Kiaochow-Tsinan Eailway were 
discussed. Considerable progress has been made toward an under- 
standing on the part of two delegations. The meeting adjourned 
until 3.15 p. m. next Monday. 



TENTH MEETING. 

The tenth meeting, held in governing board room, the Pan Ameri- 
can Union Building, Washington, D. C., at 3.15 o'clock in the after- 
noon of Monday, December 12, 1921. 

PRESENT. 

China. — Dr. Sao-Ke Alfred Sze, Dr. V. K. Wellington Koo, Dr. 
Chung Hui Wang. Secretaries : Mr. Tsong-Ou, Mr. Tsai, Mr. Tung- 
Fan Hsu, Mr. C. H. Zee, Mr. Chuan Chao, Mr. Telly Ploward Koo. 

Japan. — Baron K. Shidehara, Mr. M. Hanihara, Mr. D. Debuchi. 
Secretaries : Mr. S. Saburi, Mr. E. Kimura, Mr. H. Saito, Mr. T. Shi- 
ratori. 

Also present as observers: 

The United States of America. — Mr. John Van A. McMurray, Mr. 
Edward Bell. 

The British Empire. — The Right Hon. Sir. John Jordan, G. C. I. 
E., K. C. B., G. C. M. G. ; Mr. m: W. Lampson, M. V. O. 

SALT INDUSTRY. 

Mr. Hanihara said that, before entering into the question of the 
railway, he would desire his Chinese colleagues to enlighten him a 
little further as to the question of the salt industry. He understood 
that China would be prepared to give compensation to the Japanese 
people engaged in that industry in Shantung. He desired to know 
more concretely what the idea of the Chinese delegation was in mak- 
ing that offer. He wanted his Chinese friends to understand that 
the industry was not under Government control but was conducted 
by private individuals. Therefore, the rights and interests involved 
would have to be looked upon as vested rights and interests. If 
the Chinese plan were to be adopted, the Japanese Government would 
have to persuade those private enterprises to give up their business 
on adequate terms. First of all, the Japanese Government would 



74 

have to pay for the actual investments made by those people, and 
their expenses in winding up business as well as their losses from 
dissolving outstanding contracts. Moreover, it might be necessary 
that the loss of profits expected would also have to be compensated 
for. He should like to know whether the Chinese delegates had any 
concrete idea on these points. He asked that question, not because 
he and his colleagues agi'eed to the Chinese proposal, but because 
the}' wanted to recommend to the Japanese Government to give due 
consideration to the Chinese proposal when it was found reasonable 
and worthy of consideration. He would also be glad to be informed 
whether the Chinese Government were prepared to make the payment 
in cash or in some other form. 

Dr. Sze replied that he had assured the eTapanese delegates that 
fair compensation would be made, but that no material as to the de- 
tails, such as the amount of investment, etc., was available. If, how- 
ever, the Japanese delegates could advance any concrete proposal, 
the Chinese delegates would try to meet the Japanese wishes as far 
as possible. 

Mr. Hanihara said that the Japanese position was to regard those 
private interests as vested rights and interests, but now the Japanese 
delegates desired to give careful consideration to the Chinese propo- 
sition. In order to do so, he found it necessary to ascertain the 
Chinese views on the points he had mentioned more in detail and in a 
more concrete form. The Japanese delegates would then give all 
possible consideration to the Chinese proposition and make recom- 
mendations to the Japanese Government accordingly. 

Dr. Sze regretted that he had not detailed information at hand. 
He desired that the Japanese delegates would recommend to the 
Government to agree to the principle suggested by the Chinese dele- 
gates. In the meantime he and his colleagues would try for their 
part to obtain the necessary information. 

Baron Shidehara thought that what Mr. Hanihara wished to 
ask was whether the Chinese, in taking over the salt industry con- 
ducted by the Japanese, would be prepared to pay not only for the 
actual investments made by those people but also the expense for the 
winding up of their business and their prospective profits. 

Dr. Sze said that the term " profits " was very vague. It was not 
clear whether profits for 10 years, 5 years, or 1 year were meant. 

Baron Shidehara asked whether the expenses involved in winding 
up their business would be included. 

Dr. Sze said that that was too much a matter of detail. The Chi- 
nese delegates had received express instructions in the matter. He 
and his colleagues did not desire to make any promises which later 
thev might find themselves lacking the power to make good. 

Mr. Hanihara desired that there should be no misunderstanding 
of his question. He wanted to ask whether the Chinese delegates 
were prepared to pay compensation only for the actual investments 
or whether they were also prepared to pay for the winding up and 
other expenses which were usually paid when a transfer of a business 
took place. 

Dr. Sze said that he had personally no experience in such transfer, 
and therefore could not tell. He was only able to say that the Chi- 
nese delegates could pledge themselves as to the matter of exporta- 
tion of salt to Japan, either to the Government or to private incli- 



75 

vidiials. He and his colleagues had to ask for further instructions 
as to other matters. 

Mr. Hanihara repeated his question whether the Chinese were 
ready to compensate not only for the actual investments but for other 
legitimate interests. 

Dr. Sze said that to his mind the Japanese engaged in salt industry 
knew that there was a (xovernment monopoly system in China. They 
must also have known that Japanese military occupation was only 
of a temporary nature. Therefore he did not expect much trouble 
in letting those people understand their status. He was, however, 
ready to consult the Chinese Government on the matter, and he 
wanted that the Japanese delegates would also ascertain the views 
of the Japanese Government as to the principle suggested by the 
Chinese delegates. As for the details, they could later be arranged 
locally. 

Mr. Hanihara said that in order to give consideration to the 
Chinese proposal it was necessary for the Japanese delegates first 
to know that a fair amount of compensation would be paid. He 
wondered whether he could understand that the Chinese Govern- 
ment would be ready to take into consideration not only the actual 
investment, . 

Dr. Sze, intervening, asked whether Mr. Hanihara meant to in- 
clude the expenses for winding up and the estimated amount of 
contingent profits. 

Mr. Hanihara answer in the affirmative. 

Dr. Sze said that he would like to know how much salt Japan 
wanted. 

Mr. Hanihara said that he did not possess figures. He added 
that the export tax was another important point to be considered in 
connection with the salt industry. 

Dr. Sze assured Mr. Hanihara that the Chinese delegates desired 
to be fair and reasonable. 

It was then agreed that the question should further be discussed 
at a later meeting, and that the discussion of the railway question 
should be resumed. 

THE QUESTION OF THE RAILWAY. 

Dr. Sze said that the first proposition was that China should take 
over from Japan, immediately upon the coming into effect of the 
agreement, the Tsingtao-Tsinanfu Railway, all rolling stock, 
branches, and other appurtenances thereto. This transfer should be 
completed within six months from the date of ratification. It would 
take some time to complete the transfer of such a thing as a railway. 

Mr. Hanihara inquired whether the idea of Dr. Sze was to fix a 
time limit to the transfer of the railway. 

Dr. Sze replied that in order not to embarrass in any way the 
passenger and freight traffic, it would be necessary for China to take 
over the railway gradually. The transfer might be started imme- 
diately after the agreement took effect and be completed in six 
months or on whatever date they might be able to agree upon. 

Mr. Hanihara said he was afraid that his Chinese friend was go- 
ing too fast. It had not yet been agreed that the railway should 



76 

be handed over to China. The jn-inciple itself still remained to be 
decided. 

Dr. Sze said that in assuming charge of the railway they would 
have to proceed step by step. To a certain extent the eniployees 
w^ould have to be new. Certain dislocations w^ould naturally be 
expected. That was the reason why he desired to have some arrange- 
ment on that point. 

Mr. Hanihara said that he had understood that the Chinese dele- 
gation would give him and his colleagues the Chinese views in a 
concrete form. 

Dr. Sze said that the most important part of the question was 
what China would have to pay. China desired to reimburse Japan 
to an amount equivalent to the amount of the set-off against Avhat 
Japan had claimed for indemnity from Germany as represented by 
the appraised value of the road. The Chinese delegates had now 
understood that Japan was not to acquire the railway for nothing, 
and therefore were ready to pay the set-off decided upon by the repa- 
ration commission in Paris. China wanted to reimburse Japan to 
that amount. 

Mr. Hanihara desired to ask a question, but Avondered whether 
Dr. Sze would rather continue. 

Dr. Sze continued and said that China would issue to the agreed 
amount bonds w^hich would bear interest at the rate of 5 per cent 
per annum, payable semiannually. The redemption of these bonds 
should begin in the next year — or so many years to be agreed 
upon — after her taking charge of the railway. China further Avished 
to reserve the right at any time, upon giving six months' notice, to 
redeem all or part of the outstanding bonds. It Avas possible, how- 
ever, that there might be no necessity of bond issue at all. 

Mr. Hanihara desired to ask a question. The first point was 
whether China was prepared to pay AA^iat Japan had to pay Germany. 

Dr. Sze said that Baron Shidehara had said that Japan would 
get nothing out of the transaction, but, as a matter of fact, she would. 
In the meantime, his Japanese friends might have noticed in the 
ncAvspapers that Germany had defaulted. That might not have di- 
rect influence upon the position of Japan in the question at issue, but 
in any case, Japan had the railway in her possession. It might be 
said that " a bird in the hand is worth two in the bush." Be that 
as it might, China might be able to make cash payment, but that 
was rather a side issue. 

Mr. Hanihara said that that was not the point. What he desired 
to know was whether China would pay only what Japan would paj' 
to Germany. According to the tentative arrangement in Paris, Japan 
had to pay 30,000,000 yen to Germany for the raihvay. He wondered 
if China was prepared to pay only that amount or would pay, in 
addition to that amount, what Japan claimed as fair compensation 
for the investment she had made in the railway. 

Dr. Sze thought that Japan Avould be greatly benefited. Firstly, 
she would get the great satisfaction of the general settlement. That 
satisfaction alone would be quite sufficient. Secondly, on account 
of the unified system of railway, the facilities would be greatly in- 
creased. At present there were no direct connections between the 
Tsingtao-Tsinanfu Eailway and the Tientsin-PukoAv Eailway, but 
when China took over the railway a through service would be made 



77 

possible and the transportation would be made cheaper. The mer- 
chants in Tsingtao, who were largely Japanese, would profit by the 
change, and the Japanese trade would receive no small measure of 
benefit. Those two considerations ought to be a source of great sat- 
isfaction to Japan. Moreover, Japan would not want China to pay 
such an amount as to make the railway overcapitalized. 

Mr. Hanihara said that the point he was trying to make was this, 
that there were properties which were later acquired by Japan. Ac- 
cording to the Chinese proposition, China would be prepared to pay 
just what Japan was to pay to Germany. He desired to know if 
China considered paying for the Japanese investments apart from 
that sum. 

Dr. Sze said that ordinarily perhaps that might be the case, but 
a kind friend would not let his friend pay more than he had paid. 
China should be required to pay just what Japan would have to pay. 

Dr. Koo said that he desired to make one point clear. The railway 
was now under the military occupation of Japan, but China could 
not admit that Japan had rightfully acquired that railway. He de- 
sired to look at the situation from the point of view of fact. He did 
not quite follow why the Japanese delegates asked China to pay 
something over and above the set-off which Japan was to pay to 
Germany. China would take over the railway at its appraised value. 
Germany's claim against Japan for the railwav had been made be- 
cause Japan was in actual possession of it. But, if China was to 
admit that that property was lawfully acquired by Japan, they 
would be placed in a very intricate and difficult position. So he de- 
sired to set aside the legal point from consideration. Then the point 
would not arise whether Japan should receive anything over and 
above what she had to pay to Germany, 

Mr. Hanihara said that both delegations had agreed to set aside 
the treaty and to treat facts as they were. Japan was in actual pos- 
session of the railway, and in coming into that possession would have 
to make a payment to Germany, and, moreover, Japanese capital had 
since been invested. If China would ask for the transfer of the 
railway to herself, it would only be fair to ask of her the payment 
of an adequate amount for the improv ements made with Japanese 
capital. One further point was that the amount tentatively agreed 
uponT)y the reparation commission was not a fair valuation of the 
railway itself. In making that valuation other things were at the 
same time taken into account. The amount was not what Japan 
alone decided, but it was agreed upon at the reparation commission. 
And, moreover, the claim was made against Japan rather than 
against Germany. The arrangement was that Japan was to pay 
something like 30,000,000 yen to Germany, but that was not the 
actual value of the railway at all, the question of Japanese invest- 
ments not having been taken into account. 

Dr. Sze asked how much Japan had spent by way of investment. 

Mr. Hanihara said that he had not the exact figures. He again 
asked whether China was prepared to pay only the amount Japan 
was going to pay to Germany. If so, that proposition "was unac- 
ceptable. 

Dr. Koo said that both delegations appeared really to have agreed 
in substance. The Japanese delegates asked 

93042—22 6 



78 

Mr. Hanihara said that they had not asked anythine;. Only, he 
had been trying to enlighten himself as to the exact nature of the 
Chinese proposition. He hoped that he would not be understood 
as having abandoned the original position ^Yhic'h he had been taking 
and as to which his delegation had had explicit instructions. The 
earnest desire of the Japanese delegation, however, was to come to 
an early and fair settlement of the question. 

Dr. Koo asked if the Japanese point of view was that the money 
spent on the railway during the military occupation should be in- 
cluded in the valuation, even if that was not considered in the de- 
cision arrived at by the reparation commission in Europe. 

Mr. Hanihara said that that was just so. 

Dr. Koo said that was a question of fact. China had no desire 
to/)bject to reimbursing Japan for such money as had actually been 
spent for the pei-manent improvements of the line and the rolling 
stock. As a fair counterpart, however, profits should then be taken 
into consideration ; and, further, a small point was that the Chinese 
shares in the railway should be taken note of in adjusting Ihe ac- 
counts." So far as the principle waa concerned, China was prepared 
to consider the question of the Japanese investments, provided that 
the revenue from the railway would be credited to the line itself. 
They should be set off one against the other. It might, of course, 
turn out in China's favor, but. on the contrary, it might also tlirn out 
in Japan's favor. 

Mr. Hanihara said that, as to the question of profits, he did not 
quite agree. As to the question of the bond issue by the Chinese 
Government, he desired to know about the security for redemption^ 
about which his Chinese friends mentioned nothing. He wanted to 
know whether China had any proposal on that point. 

Dr. Koo replied that the question of security for the bonds had 
never occurred to him and his colleagues as being an essential point. 
He desired to know whether his Japanese colleagues thought it im- 
portant. 

Mr. Hanihara said he did not even know Avhether the Japanese 
Government would approve the whole proposition. It might be of 
little use to go into these points after all. However, in the ordinary 
course of business, an essential point in the flotation of bonds would 
be the security for redemption. 

Dr. Koo would have thought that the general credit of the Gov- 
ernment was sufficient, but if the Japanese delegates deemed it an 
important aspect, he and his colleagues had no hesitation in provid- 
ing an excellent security for these bonds. He desired to be informed 
whether the Shantung Railway was a paying business. 

Mr. Hanihara replied that his impression was that that was a pay- 
ing business, although he did not know personally. He had been 
informed, however, that Germany did not leave the railway in 
working order. 

Dr. Koo said that if the question of security was regarded as im- 
portant they would try to arrive at some conclusion as to what would 
be the best security. He suggested that possibly the revenue of the 
railway itself would be good security. 

Mr. Hanihara said that he was speaking for himself; he did not 
even know whether his colleagues would agree. But he considered 



79 

the question of the security as very important. He would ahnost say 
that it was imperative to know what security would be provided. 

Dr. Koo said that at present the Chinese delegation were not pre- 
pared to go very far into that question, because it had not occurred 
to them that that point would be raised. However, possibly the 
revenue of the railway itself would be most suitable. That was the 
case with the Shanghai-Hangchow-Ningpo Railway, which was in 
paying order. His colleague, Dr. Sze, had just told him that the 
surplus profit of the Peking-Mukden Eailway was also assigned as 
security for that railway. Such joractice had proven to be very 
satisfactory, and the bonds were quoted very high in the market. In 
mentioning the railway revenues, however, he and his colleagues had 
no desire to commit themselves speciiicall}^, but they were prepared 
to offer some good and safe security. 

Dr. Sze asked the opinion of Sir John Jordan as to the Shanghai- 
Hangchow-Ningpo Eailway. 

Sir John replied that that was quite satisfactory and that there 
were no complaints at all. 

Baron Shidehara said that he desired to ask a question. The 
Chinese delegates had just proposed that the net profit should be 
deducted from the value of the railway. If he had understood them 
correctl}^, their idea seemed to rest upon the assumption that China 
had been the legal owner of the railway since her declaration of war 
against Germany and that Japan had been operating the railway 
as an agent of China; because if Japan had been operating the rail- 
way on her own account and not as an agent of China he did not 
see why Japan should pass over to China whatever profit or loss the 
operation of the railway might have brought to Japan. 

Dr. Koo said that the point raised appeared to be whether Japan 
was or was not an agent of China in the operation of the railway. 
That might or might not be the case. He did not desire to enter into 
that discussion. 

Baron Shidehara asked why such an account should be made if 
Japan was not an agent of China. 

Dr. Koo said that the Chinese delegation had understood the day 
before that some expenditure had been made by the Japanese Gov- 
ernment and to-day they were informed that that investment had 
been made for improvements. In the normal course of things the 
revenue of the railway would first be assigned to defray the cost 
of operation, including salaries, and if something were left over as 
profit that might be used for the inij^rovements of the line. He under- 
stood that there was a separation of account between the expenditure 
and the revenue in the Japanese budget — salaries, for instance — 
being paid out of the central treasury direct. But so far as the net 
revenue was concerned he thought it only fair that that should be 
credited to the railway and set off against such expenditures as the 
investments in the form of improvements. 

Baron Shidehara said that while he might be slow of understand- 
ing he couldn't make Dr. Koo's point clear to himself. Mr. Hani- 
hara had mentioned the expenditure Japan had made upon the 
railway, probably because the result of that expenditure had formed 
part of the railway property. They were here going to decide what 
should be done with the railway — whether it should be handed over 
to China or be made into a Sino-Japanese joint enterprise. They 



80 

were not going back to the past. He couldn't see clearly why an 
account of the past profit and loss of the raihvay should be rendered 
to China. 

Dr. Koo said that if the cost of operation and all expenses, such 
as the salaries and wages of the railway officials and employees, had 
been paid out of the railway revenue there would be no question of 
reimbursement of expenditure. 

Baron Shiclehara said that according to the Chinese proposal 
China would get all the railway materials and the rolling stock, 
besides the railway itself. She would get the whole property and 
the whole value. He didn't see why there should be any question 
of past profits or losses. If they got the property, they ought to 
l^ay for it; if they got value created by others, thej' ought to pay for 
that, too. 

Dr. Koo asked whether expenses of rolling stock, etc., as well as 
those involved in the im])rovement made upon the railway were paid 
out of the railway revenues or from the Cxovernment treasury. 

Baron Shiclehara observed that it didn't matter how those expenses 
had been i^aid. China got the property; if it was worth, say, 
10,000,000 yen, she should pay it. The situation was this, that the 
railway having been agreed on all hands to be the private property 
of the Germans China had no right to confiscate it. 

Dr. Koo understood, however, that in the appraisal of the railway 
taken in connection with the reparation question at Paris the im- 
provements upon the railway had been left out. 

Baron Shiclehara said that Japan, in acquiring the railway, had 
to reimburse the shares held by Germans. She had. moreover, 
heavily invested in rolling stock, etc. The valuation taken by the 
reparation commission was in fact of little account, since Japan 
had to pay, not the German Government, but private individuals 
of Germany. 

Dr. Koo asked if some data of improvements made by Japan 
during her occupation could be given. 

Baron Shidehara said that figures could be given on tliat point, 
but that the question was of principle. He could not see why the 
question of past profits and losses should be taken up. Unless upon 
the assumption that China was the legal owner of the railway prop- 
erty and Japan had been using that property merely as an agent he 
could not understand why Japan, should be askecl to account for 
profits and losses. 

Dr. Koo said that usually profits of an enterprise belonged to 
shareholders. 

Baron Shidehara said that since Japan had taken possession of 
the railway she was running it on her own account and on her own 
responsibiiitv and not as an agent either of Germany or of China. 

Dr. Koo said he thought the surplus profits still stayed with the 
railway. Under normal conditions the profits would be considered 
as belonging to the railway. 

Baron Shidehara answered that there was no question of normal 
conditions. Japan had taken possession of the railway as an act of 
war as part of her military operations. 

Dr. Koo inquired if payment for the improvements had not been 
asked by the Japanese delegation. 



81 

Baron Shidehara said that it was because they formed part of the 
value of the railway. Supposing; the railway was worth 30,000,000 
yen under the German regime, Japan had added much to that value 
both with rollino- stock and various improvements. 

Dr. Koo asked if he was to understand that Japan, during her 
military occupation, was entitled to the profits of the railway and 
that such improvements as she had made upon it should not have 
been paid out of those profits. 

Baron Shidehara said it was entirely another question. The im- 
portant point was that China was going to get the benefit of the im- 
provements. 

Sir John Jordan asked Dr. Koo if he could not look at the question 
from the angle of what China was to get. 

Dr. Sze asked if Baron Shidehara counted among the improve- 
ments the repair which might have been necessitated by willful acts 
of destruction. 

Baron Shidehara said that Dr. Sze apparenth^ had in mind the 
acts of war and that in his opinion the repair of damages caused by 
the Germans' acts of war could perhaps be called improvement. 

Dr. Koo understood Japan's position to be that by reason of her 
military occupation she was entitled to operate the railway and to 
reap the benefits of that operation. In his opinion that privilege 
necessarily carried with it the obligation on Japan's part to main- 
tain the railway in good condition. In making expenditure on the 
railway, she was merely discharging that obligation. 

Baron Shidehara said lie couldn't see how it could be her obliga- 
tion. 

Dr. Sze said that whatever improvements Japan might have made 
had helped Japan to make greater profit out of the railway. It 
could not A-ery well be said that she would keep all the profit and at 
the same time make others pay for the improvements. 

Baron Shidehara said that Dr. Sze's way of reasoning was not clear 
to him. To illustrate. Germany had had an article which Japan had 
obtained from her. Japan nad herself madeianother article of the 
same nature. ]S[ow, China wanted to get both of these. Was it not 
natural that China should be asked to pay for both of them? 

Dr. Sze said that the duplication cost Japan so much more money 
but that at the same time it would give her corresponding increase of 
profits. Extra expenditure meant extra profit. Japan could not 
keep all the profits and make China pay for the improvements. 

Baron Shidehara said that Japan was operating the railway on 
her own account. She would naturally keep the profits or bear the 
losses. It was her property ; it stood to reason that China should pay 
for the whole value if she wanted to acquire it. 

Dr. Sze insisted that Japan could not make China pay for what 
helped her make monej^ 

Mr. Hanihara said he doubted if he could better explain the situa- 
tion than Baron Shidehara, but that he would give an illustration. 
Suppose A had owned the railway between Washington and Balti- 
more and had transferred it to B for $10,000,000. B had made im- 
provements upon the property, reaping, of course, profits out of the 
improvements. Now. imagine that after five years A should propose 
to B to repurchase the railway, would A say to B, " You have made 
profits out of the railway. The amount of your profits should be 



deducted from whatever value may have been added to the railway 
on account of your improvements. Suppose your profits exceed the 
cost of your improvements, vou will deduct that surplus from the 
$10,000,000 you paid me?" 

Dr. Sze said that it all depended upon circumstances, and that the 
proper thing to be done would be to let experts look into the matter 
of the value. 

Mr. Hanihara said that he was talking only about profit. 

Dr. Sze said that the original Chinese proposition was to pay to 
the amount of half the value of the railway, while the present plan 
was to pay for the whole value. That would mean a hundred per 
cent more. 

Baron Shiclehara asked if there was really any difference between 
the two plans. 

Dr. Sze said that under the second China would psij for every- 
thing, minus profits and the sum of the shares held by Chinese. 

Baron Shiclehara asked whether, when he said the whole value 
minus profits and the Chinese shares, he meant not simply the 
amount of money to be paid to Germany but the whole value of the 
railway. What if there were losses? 

Dr. Sze said that China was willing to take that chance. 

Baron Shidehara said that the situation was now clear to him. He 
had thought Japan was to get no payment for what she had spent. 

Dr. Koo said that she would be paid only what had been defrayed 
out of her treasury and also for the cost of improvements. The 
Chinese delegation were trying to agree in principle to the Japanese 
point of view. 

Baron Shidehara said that the Japanese delegation still believed 
in the fairness and justice of the original Japanese proposal, but 
that if any suitable alternative plan could be worked out they would 
be ready to recommend it to their Government for consideration and 
approval. Unless, and until such an alternative plan should be 
offered, it was impossible for them to commit themselves to the scrap- 
ping of their original plan, which had already been agreed to by the 
Chinese Government in 1918. If his Chinese colleagues should offer 
any suggestion, the Japanese delegation would be quite ready to take 
it up, and if they found it fair and suitable they would submit it 
to Tokyo for approval. In the meantime they had to reserve their 
original plan. 

Dr. Koo asked in what way Baron Shidehara thought the Chinese 
plan lacking. 

Baron Shidehara said that the situation was this, that the Japa- 
nese Government proceeded from the assumption that the railway 
was her property, having been acquired from Gemany. China had 
made no arrangement with Germany and was therefore not in a posi- 
tion to claim anything in regard to the railway. Of course, China 
could not confiscate it on the ground of the belligerent state that had 
existed between her and Germany because it was considered as pri- 
vate property of the Germans. JHe was not criticizing the Chinese 
plan ; he was only trying to make himself sure of the meaning of the 
ChiniBse proposal. But when it was said that the profit of the railv^ay 
should be deducted from the amount of its value it was hard for him, 
in view of what was stated above, to see why such deduction should 
be made. 



83 

Dr. Koo said he understood that the Japanese delegation considered 
the railway as Japan's property. It was not necessary for him to state 
the Chinese view of that. The Chinese Government, however, had the 
same right to their opinion that the Japanese Government had to 
theirs. They could not share the Japanese view in this matter. 

Baron Shidehara asked if the railway was considered as a Chinese 
property. 

Dr. Koo said that it was regarded as a Sino-German joint property, 
but that it was a question he would rather not discuss now. 

Baron Shidehara said that the status of the railway was an impor- 
tant point. If they started from the assumption that the railway was 
a Chinese property there would be no doubt of the fairness of the 
Chinese proposal. Japan would have no right to interfere in this 
question. 

Dr. Koo said that the very fact that discussions were being had by 
the two delegations showed that the status of the railway was in 
doubt. • 

Baron Shidehara said that they were only going to fix its future 
status. 

Dr. Koo said that that was why they had better leave out the ques- 
tion of the past. Japan wanted to hand it over to China, and China 
wanted to take it up. 

Baron Shidehara asked why, then, past profits were mentioned. 

Dr. Koo said that the Japanese delegation had mentioned salaries 
and improvements. They were prepared to meet the Japanese demand 
a.i far as possible, and therefore they desired to have figures concerning 
the profits and the improvements of the railway. 

Mr. Hanihara said that the figures concerning the profits had to be 
referred to Tokj'o, but those concerning expenditure could be given 
right here. 

Baron Shidehara said that the question of salaries was immaterial ; 
they were not an important item of the expenses. He supposed that 
it was the net profit that was wanted by the Chinese delegation. That 
could, of course, be obtained by deducting gross expenditure from 
gross profits. 

Dr. Koo said that he should be glad to drop the question of salaries 
and wages ; these were generally paid from the railway revenue. 

Baron Shidehara said they represented only a small part of the 
railway expenditure. In an}^ case they were things of the past. If 
China was going to get the whole ownership of the railway, it would 
seem only fair that she should pay the whole value without reference 
to profit or loss. 

Dr. Koo asked if improvements were included in that " whole 
value" and if expenses, salaries, and all that were to be left out of 
consideration ; in other words, if wha't was meant was the value of the 
railway as it stood to-day. 

Baron Shidehara answered in the affirmative. 

Mr. Hanihara said that after two days' discussion he thought they 
understood each other's position better. After a deliberate examina- 
tion of the Chinese proposal the Japanese delegation might offer their 
observation at the succeeding meeting. 

The Chinese delegation summarized their revised proposal in the 
following way: 



84 

1. China to take over from Japan immediately upon the coming 
into effect of this agreement the Tsingtao-Tsinan . Railwa3% its 
branches, all the rolling stock, equipments, etc., and all other appur- 
tenances thereto. This transfer shall be completed within six months 
after the date of ratification. 

2. China to reimburse Japan to an amount equivalent to the amount 
of set-off which Japan claims against German}^ for indemnity, as 
represented by the appraised value of the road and its appurtenances, 
minus the Chinese capital to the amount of 360,000 marks gold and 
all interim profits during the period of Japanese occupation. China 
will issue to the agreed amount bonds which will receive interest at 
the rate of 6 per cent per annum, payable semiannually. The redemp- 
tion of these bonds shall begin on the year after taking charge of the 
railway, etc., by China by annual drawings of one— th of the total 
number of bonds issiied ; the last draAving payment shall be completed 
in the year 

China at any time, upon giving six months' notice, may redeem all 
or an}^ part of the outstanding bonds. 

The press communique was agreed upon (Annex I) and the meet- 
ing adjourned at 5.30 p. m. until 3 p. m. Tuesday. 

Wi\^HiNGT0N, D. C, Decemter i^, 1921. 

SJC-IO.] 

Annex I. 

December 12, 1921. 
[For the press.] 

The tenth meeting of the Chinese and Japanese delegates relative 
to the question of Shantung took place in the governing board room 
of the Pan American Union Building. The question of Kiaochow- 
Tsinan Railway was discussed. The meeting adjourned at 5.15 p. m. 
until 3 o'clock to-morrow afternoon. 



ELEVENTH MEETING. 

The eleventh meeting, held in governing board room, the Pan 
American Union Building, Washington, D. C, at 3 o'clock in the 
afternoon of Tuesday, December 13, 1921. 

PRESENT. 

China.— Dv. Sao-Ke Alfred Sze, Dr. V. K. Wellington Koo, Dr. 
Chung Hui Wang. Secretaries : Mr. Tsong-Ou, Mr. Tsai, Mr. Tung- 
Fan Hsu, Mr. C. H. Zee, Mr. Chuan Chao, Mr. Telly Howard Koo. 

Japan. — Baron K. Shidehara, Mr. M. Hanihara, Mr. K. Debuchi. 
Secretaries: Mr. S. Saburi, Mr. E. Kimura, Mr. H. Saito, Mr. T. 
Shiratori. 

Also present as observers : 

The United States of America. — Mr. John Van A. MacMurray,. 
Mr. Edward Bell. 

The British Empire. — The Right Hon. Sir John Jordan, G. C. I. E.,. 
K. C. B., G. C. M. G. ; Mr. M. W. Lampson, M. V. O. 



85 



THE QUESTION OF THE RAILWAY. 



Baron Shidehara desired to make observations on the more im- 
portant features of the Chinese counterproposal respecting the dis- 
position of the Shantung Railway, as follows : 

" 1. It is understood that the question of mines appurtenant to the 
railway may be set apart for separate consideration. 

" 2. The value of the Shantung Railway properties to be credited 
to Germany in the reparation account under the treaty of Versailles 
takes into account only the value of such properties as were left 
behind by the Germans. It does not represent the whole value of the 
said properties as they stand at present. It is presumed that it is not 
the intention of the Chinese delegation to propose that, in taking 
over the entire railway properties from Japan, China is to pay to 
Japan only for a portion of their actual value. Should it be agreed 
that the entire railway properties be handed over to China, it seems 
only fair that she should pay for whatever they are actually worth. 

" 3. Amount of money to be credited to Germany in the reparation 
account in relation to the Shantung Railway is to cover indemni- 
fication to all the shareholders of the railway company. It is not 
possible for Japan to make any special agreement with China which 
would place Chinese shareholders of the company on a different 
footing from those of other nationalities and which would involve 
modifications in the existing arrangement under the treaty of Ver- 
sailles. 

" 4. The railway has hitherto been operated by Japan on her own 
account and responsibility. It will be admitted that China is not 
the legal owner of the railway until an agreement to that effect shall 
have been made, and it seems evident that Japan can not properly be 
called upon to turn over to China whatever profits or losses may have 
been caused to Japan during her administration of the railway. 

" 5. It is extremely unlikely that the money market of any country 
will be ready for the present to provide a loan to China to cover the 
payment now proposed, unless the loan agreement is formulated on 
the basis of the terms embodied in railway loan agreements of com- 
paratively recent dates which China has entered into with various 
foreign capitalists. 

" The foregoing observations are made entirely without prejudice 
to Japan's original plan of a joint enterprise of the railway." 

Dr. Sze thought that as to the proposition in the first paragraph 
the Chinese delegation was ready to agree. The mines would be 
considered separately from the railway itself. As to paragraph 2, 
he desired to ask what was meant by " the entire railway properties." 
When they were taking up the question of public properties, it was 
agreed that the wharves — ^Wharf No. 3, particularly — and ware- 
houses would be considered in conjunction with the railway rather 
than under public properties. He wondered whether Japan was 
going to make China pay for those wharves, etc. 

Baron Shidehara replied that it was not the intention of the Japa- 
nese Government to ask payment from China for these wharves, 
warehouses, etc. He didn't know, however, whether any improve- 
ments had been made upon them. If improvements had been made 
on the wharves, etc., it would be only fair that China should be 



86 

required to pay for their value. To the extent that Japan had 
received from (Termany, she would hand over to China without pay- 
ment, but to the extent that Japanese capital had been expended for 
improvements, she would require China to make reimbursement. 
That would be the principle covering warehouses, etc. 

Dr. Sze asked what Japan Avas going to do with certain things 
which had been put up ; for insta*nce, the barracks for soldiers and 
the wireless stations. 

Baron Shidehara replied that they would be handed over to China. 

Dr. Sze asked how the valuation of those things was to be made. 

Baron Shidehara replied that it would be carried out on the same 
principle as the railway itself. 

Dr. Sze observed that things of that nature were sometimes of 
little or no use to the Chinese. The railway could be operated at a 
profit, but China might not be able to utilize at all, or to the full 
extent, establishments like barracks or wireless stations. 

Baron Shidehara remarked that those barracks might be of much 
use to China. The Chinese Government were going to organize a 
police force to safeguard the railway. He presumed that those 
buildings would be suitable for tlieir use. 

Dr. Sze said that during the German days there were some bar- 
racks Avhich might be sufficient for the use of the police force; they 
might not need any additional barracks set up by the Japanese, lie 
v;as not sure whether China could utilize those buildings to the full 
extent. 

Baron Shidehara said he Avas not personally informed as to the 
size of those barracks, but such details could easily be Avorkecl out 
by the commissioners on the spot. They could find out whether the 
buildings were of any value. 

Dr. Sze said that the reason he had referred to that question was 
because when the question of public properties was under discussion 
they agreed that the depreciation and the continuing value would be 
taken into consideration. 

Baron Shidehara replied that those considerations would certainly 
be weighed in making the valuation, but they could be considered 
later. 

Dr. Sze desired to make it clear to himself whether Baron Shide- 
hara meant that as to AA^harf No. 3 only the payment for the im- 
provements was required. 

Baron Shidehara replied in the affirmative. 

Dr. Sze inquired about the Avireless stations set up during the 
period of the military occupation. 

Baron Shidehara replied that with regard to the Avireless station in 
Tsinan he could say that Japan was ready to hand it over to China. 
As to the one at Tsingtao, how^ever, he desired to have a few days be- 
fore he made a definite ansAver. The GoA'^ernment instructions on that 
point were not explicit and there were certain phases to which he had 
to give further consideration. 

Dr. Sze said that those things were more or less connected with the 
troops. If China should be able to make use of them, they would be 
glad to take them over, but dismantling itself Avould mean some ex- 
penditure and China desired to make sure about the usefulness of the 
wireless stations. Another point he desired to make clear was about 



87 

the expenditure which Japan had made, more in fulfillment of the 
Anglo-Japanese alliance than in connection with the railway. He 
desired to know what was the Japanese proposition as to that class 
of expenditure. 

Baron Shidehara desired to know more specifically what Dr. Sze 
had in view. 

Dr. Sze said that his attention had been called to that phase of the 
question by one of the Chinese experts. Some establishments might 
not have direct connection with the railway, but rather with the mili- 
tary movements and the protection of the railway. He had nothing 
particular in mind, but wireless stations might come under that cate- 
gory. 

I3aron Shidehara asked if Dr. Sze had not said something about 
the Anglo-Japanese alliance. He supposed that the terms of the alli- 
ance had no connection whatever with the establishments in Shantimg. 

Dr. Sze said that the Chinese delegation had thought that it was 
under the terms of that alliance that Japan attacked Tsingtao. There 
might be some establishments which had no direct connection with 
the railway. For instance, the installation of the wireless stations 
had possibly been a military measure and had no direct connection 
with the railway. There might also be some few telephones, or things 
of a like nature, established for war purposes. 

Baron Shidehara said that that question had never occurred to him. 

Dr. Sze asked whether Japan desired China to pay for locomotives 
and cars which had replaced old locomotives and old cars. 

Baron Shidehara replied that his point was, that China should pay 
for whatever the properties were actually worth. As to the details, 
it was very difficult for him to answer oifhand. He wondered whether 
Dr. Sze meant by old cars and old locomotives those that were of no 
value — whether he meant cars no longer in use. 

Dr. Sze said that they might have been removed. He thought, as a 
general principle, deduction ought to be made for things taken away. 

Baron Shidehara assured Dr. Sze that it was not his intention to ask 
for payment for anything no longer of any value. 

Dr. Sze asked in what manner the actual value of those things was 
to be ascertained. 

Baron Shidehara replied that that was a very difficult question to 
answer. That was a practical question. 

Dr. Sze thought that the definition of that point was very im- 
portant. Unless they had some definite method of appraisal they 
would have no guiding principle along which to proceed. 

Baron Shidehara asked whether Dr. Sze had in mind the question 
of depreciation. 

Dr. Sze replied that that was so. 

Baron Shidehara said that that would be taken into consideration. 

Dr. Sze observed that Japan had been in occupation of Kiaochow 
since 1915. Seven years had since elapsed, and it would be only fair 
that depreciation and continuing value should be taken into con- 
sideration. 

Baron Shidehara agreed. 

Dr. Sze asked what Baron Shidehara had in mind as to the valua- 
tion of the railroad itself ; what he meant by the " actual value." 

Baron Shidehara replied that he thought that those questions 
could only be decided by the commissioners to be appointed. , 



88 

Dr. Sze said so far as the improvements were concerned he agreed 
to the views of Baron Shidehara. He desired to get his opinion 
about the road itself. 

Baron Shidehara asked whether Dr. Sze could suggest any prin- 
ciple which would govern such phases of the question. 

Dr. Sze questioned again about the road. 

Baron Shidehara asked whether Dr. Sze meant the railway tracks. 

Dr. Sze replied that he meant what the Germans had left when 
Japan took the railway over. 

Baron Shidehara asked whether any principle could be suggested. 

Dr. Sze said if the Japanese delegation could supply a list of all 
the improvements made by the Japanese the matter would be sim- 
plified, but he understood that the Japanese delegation was not in 
possession of the necessary data. He supposed that the guiding prin- 
ciple might be something like this: China to pay Japan the value 
of the railway determined by the reparation commission, plus the 
value of the improvements, taking into consideration the deprecia- 
tion and the continuing value. But he added that the value of the 
improvements should in no case exceed 10 per cent of the reparation 
value of the railway. He said that he had to have some idea about 
the amount China would eventually have to pay to Japan. If China 
had to issue loans in order to make that payment she would have to 
make arrangements for their flotation. That was the reason why 
he desired to have some limitation as to the amount to be paid for 
improvements. 

Baron Shidehara remarked that to limit the amount to 10 per cent 
of the reparation value of the railway was somewhat arbitrary. 

Dr. Sze admitted that that was rather arbitrary, but he could not 
do otherwise, as he had no data to go by. He wished he had the list 
of the improvements, so that he could have a better idea as to the 
amount to be paid by China. 

Baron Shidehara said that Dr. Sze's suggestion was that in deter- 
mining the actual value of the railway they were to take the repara- 
tion amount plus the value of improvements minus depreciation. 
So much was quite fair. China need not pay for such properties as 
had no longer any use or value, but as to the 10 per cent limitation, 
that was too arbitrary. He had at that moment no idea as to what 
the value of the improvements would amount to, but the principle 
of arbitrary limitation could not be accepted. 

Dr. Sze said that if he could get some idea about the approximate 
value of the improvements in two or three days that would help him 
a good deal in making loan arrangements. As a matter of fact, the 
Chinese delegation had had some offers. That was the reason why- 
he and his colleagues were anxious to ascertain what the size of the 
loan would be if they had to go about the flotation. He admitted 
the arbitrariness of the 10 per cent proposition, but if the Japanese 
delegation could furnish him any data as to the point in question it. 
would be very useful. 

Baron Shidehara answered that the Japanese delegation might 
perhaps obtain some rough estimate of the value of the improve- 
ments, but it would be very difficult to ascertain the amount of de- 
preciation. As to the value of improvements, he would ask Tokyo for 
information. 



89 

Dr. Sze said that that would be of great help to the Chinese delega- 
tion and desired that a telegraphic inquiry should be sent to Tolry^o. 
He said that there was one point which was particularly difficult for 
the Chinese delegation to explain to their people at home. They 
would be blamed by their people for not having made satisfactory 
arrangement for Chinese shares, for what China had put in the rail- 
way, while they had consented to so many arrangements necessitat- 
ing payment of money b}^ China. He thought Japan simply had to 
€redit to Germany so much the less. 

Baron Shidehara said it was actually difficult for Japan to accede 
to the Chinese desire. There were, besides Chinese shares, those in 
the hands of other nationals. If any special agreement was made 
with China some arrangement had to be made for them also. 

Dr. Sze thought that Japan could excuse herself on the plea of the 
different footing of the Chinese. He hoped the specially difficult 
position of the Chinese delegation would be appreciated by the 
Japanese colleagues. The question was of only small value finan- 
cially. But its sentimental value could not be overlooked. 

Baron Shidehara said that he appreciated the position of the 
Chinese delegation, but that he thought it was difficult for Japan to 
satisfy China in that respect. The German Government had already 
agreed that it should make arrangement with other nationals inter- 
ested in the Shantung Railway. The matter would involve the ques- 
tion of the modification of the principle which had been decided 
upon at the reparation commission and in the treaty of Versailles. 
Any special arrangement made with China would, of course, become 
known to all the world. He was afraid the Chinese desire might be 
difficult to be met. In any case it was not a very important ques- 
tion. 

Dr. Sze said that Dr. Koo had just drafted a formula in regard to 
the railway properties, reading as follows: 

" China to pay the actual value of the Shantung Railway proper- [ 
ties, as represented by the reparation commission figures, plus the ' 
actual amount, minus depreciation, expended by Japan, for such per- 
manent improvements on the roadbed and in rolling stock and equip- ! 
ment as were effected by Japan during the period of her military^ 
occupation." 

Mr. Hanihara inquired if the word " equipment " could include 
reclaimed land, wharves, warehouses, and such other properties as 
were used in connection with the railway. 

Dr. Sze asked if those properties could not be treated according to 
the principle adopted in connection with the public properties. 

Mr. Hanihara said that " equipment " might mean much, then 
again it might mean nothing. 

Baron Shidehara did not think that reclaimed land could be in- 
cluded in "equipment." 

Dr. Sze wondered if that did not belong to public property. 

Baron Shidehara said that there were tracts of land reclaimed 
for the purpose of the railway. He thought there had been a plan 
to construct workshops, which would involve the reclamation of a 
large tract of land. 

Mr. Hanihara said there were many houses built in connection 
with the operation of the railway. Those, he thought, ought to be 
included among the railway properties. 



90 

Dr. Sze suggested that some Avords might be inserted in the formula 
to cover the point raised by Mr. Hanihara. 

Baron Shidehara observed that instead of enumerating all these 
different kinds of railway properties it would be better simply to 
say " railway properties/' He would further suggest to use some 
such words as " additions to the railway properties " somewhere. 

Dr. Koo said that he understood that reparation value was not the 
whole value. He Avished to know what it represented, whether it was 
the value of the railway properties as they had been left by the Ger- 
mans in 1914. 

Baron Shidehara said that it was. The railway })roperties. as 
represented by the figures of the reparation commission, had for- 
merly belonged to Germany, but the improvements since made were 
Japanese property. These latter should not have come up before the 
reparation commission. 

Dr. Koo said that, that being the case, the value the reparation 
commission had had in view must naturally have depreciated through 
seven years' use of the property. 

Baron Shidehara said that Avhile it Avas possible that there had 
been some depreciation, it must be mentioned at the same time that 
the value of the raihvay properties had, as a matter of fact, greatly 
enhanced during those years. It had been constantly going up. Cer- 
tainly the raihvay proj^erties could not at present be acquired at 
the price prevailing before the Avar. 

Dr. Sze said that that phase of the matter could be considered 
along with the question of appreciation. He thought that it might 
be appropriate to have the phrase "subject to the principle of con- 
tinuing value " at the end of the formula discussed a moment ago. 

Baron Shidehara said that they had already agreed as to " actual 
value." The meaning was to his mind pretty clear. 

Dr. Koo inquired if he was to understand that only those prop- 
erties would be considered which Avere of continuing value to China. 

Baron Shidehara observed that, although a minor point, the words 
" military occupation "' might better be changed to " administration 
of the raihvay." 

Dr. Koo agreed. 

Dr. Sze said that he would like to have it quoted in the minutes 
that only such properties as Avere of continuing A'alue to China Avould 
be considered. 

Baron Shidehara agreed. 

Dr. Sze here read the amended formula as follows : 

" China to pay the actual value of the Shantung railway proper- 
ties as represented b}^ the reparation commission figure plus the 
actual amount, minus depreciation, that was expended for such per- 
manent improA'ements on or additions to the railway properties as 
were effected by Japan during the period of her administration of 
the railway." 

Dr. Sze, continuing, inquired whether the reparation figures Avere 
based on the agreement whereby Germany had handed oA^er the rail- 
way to Japan, and if Japan had received an inventory of the prop- 
erties. 

Baron Shidehara said he presumed so. 

Dr. Sze said that they had now settled the first and second points 
of Baron Shidehara's observations. As to the third point, he wished 



91 

the Japanese delegation would see their way clear to take the matter 
into consideration once more. 

Baron Shidehara answered that at present he did not. see how the 
Chinese desire could be met. 

Dr. Sze said that as to the fourth paragraph the Chinese delega- 
tion met the Japanese point. 

In regard to the fifth paragraph. Dr. Sze admitted that the terms 
of the proposed loan ought perhaps to be a little different from other 
loans. Five per cent was the rate of interest of many Chinese rail- 
way loans. He quite realized that the money market to-day was 
entirely different, but still he noticed that the allied war loans bore 
6 per cent interest. That was why the same rate of interest had been 
offered in spite of the changed condition of the money market. It 
must be pointed out, however, that the Chinese Government might 
be able to make cash payment and that the plan proposed by China 
might, after all, mean nothing. 

Baron Shidehara said that it was not his intention to propose a 
loan to be furnished by the Japanese Government. The Japanese 
Government could not do it, for all loans had to be approved by the 
Diet. It was impossible for him to commit the Government in that 
respect. His idea was only that perhaps Japanese private financiers 
might take up the loan. 

Dr. Sze said that the Chinese delegation Avould be placed in a diffi- 
cult position if they could not tell his people anything definite about 
the terms of the loan. Of course, they would have to ask about the 
details of the loan before they made any offer. 

Baron Shidehara said it was impossible to consider any loan by the 
Japanese Government. 

Dr. Sze said that possibly bonds might be issued to the Japanese 
Government, as in the case of the Canton-Hankow Railway. 

Baron Shidehara said that it was impossible for the Japanese Gov- 
ernment to advance money. Apparently it was Dr. Sze's idea that 
the Japanese Government should buy those bonds. That was also 
impossible for the Japanese Government, unless with the authoriza- 
tion of the Diet. 

Dr. Sze suggested to leave paragraph 5 to later consideration. 

Dr. Koo said that the question of a loan was not coming until it 
was found impossible for the Chinese Government to raise the money 
needed for the compensation of the railway properties. There was 
no immediate necessity to settle the question. 

Mr. Hanihara said that Baron Shiclehara's observations had not 
been made as a proposition. The Japanese delegation were only try- 
ing to enlighten themselves on the various points of the Chinese 
proposition. 

Dr. Sze suggested that what had been agreed upon so far might be 
summarized. 

Dr. Koo said that, in other words, there had been a practical and 
substantial agreement upon the question of paying compensation for 
the railway properties. Might the Chinese delegation not consider 
their proposal as agreed to in substance and in principle? 

Mr. Hanihara said that the Chinese delegation had obviously mis- 
understood the nature of Baron Shidehara's observation. The 
Japanese delegation had not proposed anything. The closing sen- 



92 

tence of the baron's statement oiioht to have been enough to prevent 
any misunderstanding. If there had been any agreement reached, 
it was only on the meaning of the Chinese proposal. The Japanese 
delegation still stuck to their original proposal. They were only try- 
ing to see if the Chinese counterproposal was acceptable, so that, if it 
was acceptable, it might be referred to Tokio. 

Dr. Sze Avondered if they had not been negotiating on the five 
points of the eTapanese proposal. 

Baron Shidehara said it Avas not a proposal by any means ; that the 
original Japanese proposal still stood good. 

Dr. Koo said that as a matter of fact they had reached an under- 
standing on the various points of the Chinese proposition. There 
had been a practical agreement on the broad principle of the disposi- 
tion of the railway i)roperties. They now knew how to proceed 
further from that principle. 

Mr. Htuiihara said that evidently his Chinese friends seemed to 
start from the assumption that the Japanese delegation had agreed to 
turn over the railway to China, but that they had not done anything 
of the sort. They had simply been studying the proposition laid be- 
fore them. He hoped there would be no misunderstanding. 

Dr. Koo said that, to put it another way, the Chinese delegation 
had, in deference to the views expressed by Baron Shidehara, been 
making concession after concession, until the Chinese proposal had 
now been made acceptable to the Japanese delegation. If they were 
prepared to abandon their plan of joint enterprise, they would find 
the method proposed by China agreeable. They had now before them 
two acceptable things — the joint enterprise and compensation for the 
railwa}^ properties. The first was not acceptable to China, while the 
second was acceptable to both. 

Mr. Hanihara emphatically denied that the Japanese delegation 
had said the Chinese proposal was acceptable. 

Dr. Koo said that the Chinese delegation had all along been mak- 
ing concessions and modifications in order to make their proposals 
acceptable to Japan. He asked whether, in order to mark a step-' 
in their discussions, it could not be considered as agreed that the 
railway properties could be disposed of on the basis of what they 
had agreed to during the day's discussion. 

Mr. Hanihara said that they were still at a stage where they 
were only trying to find out a common ground, for if both sides 
stuck to their original position there would be no adjustment. 

Baron Shidehara said that the progress so far made amounted 
to this — that they both made their positions entirely clear to each 
other. But there was no agreement. That was the present stage 
of progress. 

Dr. Sze said that not only had the Chinese position been made 
clear, but many modifications of that position had been made to 
meet the points of Baron Shidehara's observation. 

Baron Shidehara said that the Chinese counterproposal had been 
made clear by the questions put by the Japanese delegation, but 
that there were still certain features which had not yet been quite 
clarified. 

Dr. Wang inquired how the Chinese proposal, if not accepted, 
had impressed Baron Shidehara. 



93 

Baron Shidehara answered that, as said yesterday, his mind was 
open to any suggestion, but that he could not say that he was either 
in favor of or against the proposal. 

Dr. Koo asked if he could not say how to-day's Chinese propo- 
sition seemed to him. 

Mr. Hanihara said that it was very necessary for the two dele- 
gations to approach and solve the so-called " Shantung question " 
as a whole. The railway question was surely the most difficult of 
all the questions to be discussed, but, at the same time, they should 
not lose sight of the several other questions which had likewise to 
to be solved if they were to reach a satisfactory settlement. As he 
had suggested before, it would be better, in order to accelerate the 
progress of the discussion, that other matters which might be sus- 
ceptible of easier solution were now taken up, and they could come 
back to this question of the railway after adjusting those easier 
points. Then they could more easily come to an agreement on the 
question of the railway from the perspective of the entire Shantung 
question. 

Dr. Sze said that he feared that the criticism at home and 
elsewhere would be that the delegates had once discussed the ques- 
tion of the railway, and after taking an adjournment, came back 
to the same question; and that they were now going again to ad- 
journ. It would be very hard to make an explanation to the Chinese 
public. While he appreciated the Japanese standpoint that it was 
necessary to have some time to consider, he feared that he could 
not agree to proceed to another question. 

Mr. Hanihara said that from his strictly personal point of view 
the best method of discussion would be to proceed not too hurriedly. 
He thought the railway question was the most difficult of all the 
questions to be solved in connection with the Shantung question. 
To be perfectly frank, he still believed that the original proposition 
of a joint undertaking was a very fair and generous offer, although 
the Chinese delegates seemed to be far from being satisfied with that. 
In the circumstances, if they went on discussing the railway ques- 
tion without knowing what might be the final adjustments of other 
matters, it would be difficult to find the ground for compromise to 
which, after all, they had to come in order to reach an agreement. 
These other questions, while they might be of minor importance, 
formed important parts of the entire question, and they might be 
more easily solved than the question of the railway. When they were 
composed, the railway question would become the only remaining big 
question. The negotiators would be able to see where they stood and 
exercise their ingenuity and effort in such a manner as to find out a 
settlement acceptable to both. The question could be approached as 
a whole and settlement could be reached accordingly. In tha»t way 
they would know in what way they could come a step forward in 
conciliation and compromise. 

Dr. Sze said that there was no use disguising his feeling. He felt 
a. great pain in listening to the words of Mr. Hanihara. Indeed, he 
felt not only pain, but a great disappointment. He regretted to say 
so, but he could not help it. 

Baron Shidehara said that he could not understand Dr. Sze's dis- 
appointment. The Japanese delegates had not said that they were 

93042—22 7 



94 

against the Chinese proposition, although they did not say that they 
were in favor of it. That was the present stage of their negotiations. 
He thought that fair progress had already been made. 

Dr. Koo said that the usual course followed by tlie two delegations 
in the discussion of many other questions was to sum up at the end 
of the conversation and make a tentative agreement upon any par- 
ticular point, subject to the settlement of the whole question. The 
question of the customs, which proved to be rather easy of solution, 
Avas treated in that manner. As to the railway question, the Chinese 
delegates had not only tried to make clear their position, but had 
made various concessions in order to enable both delegations to come 
to a tentative agreement, subject, again, to the settlement of the whole 
question. He and his colleagues desired to know if such stage had 
not yet been reached. He thouglit that they knew now w^here they 
stood in regard to this most important of all questions. It was very 
desirable to say at least that the points threshed out so far, to- 
gether with various concessions made by the Chinese delegates, 
would form the substance of an agreement. Only with that under- 
standing, and also with the understanding that the agreement would 
be subject to the settlement of the whole question, could they pro- 
ceed to some other matter. 

Mr. Hanihara said that he could not agree to the view taken by 
Dr. Koo. Suppose they tentatively agreed on that most important 
question and they could not agree on small matters, the situation 
would be very awkward. He felt sure that they could more easily 
reach an adjustment as to other questions and the whole situation 
would be made much easier. 

Dr. Koo said that there was a general guaranty in the agreement 
previously reached that no decision on any single question would 
come into force unless the whole question was solved. Therefore 
the Japanese position was quite safeguarded. 

Mr. Hanihara said that that was quite clear, but that the question 
was which method would be better — to take this question first, or to 
take other minor questions first. Japan had made even greater 
concessions than China. So far as he could see, the Japanese dele- 
gates had been carrying on the negotiations in a very conciliatory 
spirit. 

Baron Shidehara said that, as a matter of fact, the Chinese dele- 
gates had reserved the discussion of paragraph 5 for a future oc- 
casion. 

Dr. Koo said that the reason why the Chinese delegates had de- 
ferred the discussion of paragraph 5 was only because they were not 
able to .ascertain whether it was necessary, after all, to issue loan 
to make the payment. In any case that was a question of small and 
secondary importance. 

Baron' Shidehara said that he thought it would accelerate the dis- 
cussion to pass to some other question for the present, because he de- 
sired to have a few days to give consideration to the question of the 
railway. . . 

Dr. Wang asked whether the Japanese delegates could provision- 
ally come to an agreement, subject to the settlement of the whole 
question. 



95 

Baron Shidehara said that the Japanese delegates had made their 
position sufficient!}^ clear. They had been carrying on discussions 
with the understanding that they would be carried on without 
prejudice to their original plan of a joint enterprise. They had 
already said that they were not against the Chinese counterproposal. 
But at the same time they had not said that thej^ accepted it. They 
had, however, to have time to consider. It would take a few days 
more before they could make a decision. He was happy to say that 
the Japanese delegates had now fully understood the Chinese posi- 
tion. He thought that that would certainly help them to reach a 
satisfactory settlement. 

Sir John Jordan asked how long it would take for the Japanese 
delegation to come to a decision. 

Baron Shidehara replied that it would not take very long. He 
said to the Chinese delegates that they would meet again to-morrow 
presumabl}^ He added that, to be perfectly frank, the Japanese 
delegation had no definite instruction on the point. For his part, 
he was willing to give consideration to the Chinese proposition. 

Dr. Koo suggested that if the Japanese delegates found it neces- 
sary to obtain specific instruction, they might adjourn the meeting 
until they got it. 

Baron Shidehara said that it would be useful to take up, in the 
meantime, other questions in order not to waste time. 

Mr. MacMurray asked how many days the Japanese delegates 
considered it necessary to wait. 

Sir John Jordan said that the Chinese delegates were in a very 
difficult position. 

Dr. Koo said, so long as the general question was not settled, no 
part of the agreements would go into effect. He did not see the 
reason why the Japanese delegates should have any hesitation in 
agreeing in substance and tentatively on the question of the railway. 

Mr. Hanihara remarked that, as Baron Shidehara said, the Jap- 
anese delegates had no explicit instructions except that they had to 
stand by the original plan of joint enterprise. But they were ear- 
nestly seeking an arrangement which they might find themselves able 
to recommend to the Government. That was a verj^ fair and proper 
stand for them to take. 

Dr. iSze wondered what was in the mind of the Japanese dele- 
gates — whether they were waiting for all other questions to be dis- 
cussed and decided upon or whether they were awaiting instructions 
from home. 

Mr. Hanihara said that, on the supposition that the Japanese dele- 
gation would recommend to the Government to modify their former 
decision, it would be necessary to attach to such recommendation 
the reasons therefor. In order to ask instructions, he had to be able 
to say that all other matters would be settled in a satisfactory way. 

Dr. Sze said that he was constrained to use plain words. It had 
never been agreed that the Japanese delegates were to make a recom- 
mendation to their Government on any particular matter only when 
all other questions were disposed of. 

Dr. Wang said that the Japanese delegation had the general 
guaranty and that there was no danger in accepting the Chinese 
proposition. 



96 

Baron Shidehara asked whether the Chinese stand was that no 
other questions would be considered before the question of the rail- 
way was disposed of. 

Dr. Wang said that the Chinese delegation placed the railway 
question before any other question. 

Baron Shidehara said that he could not see why they should need- 
lessly lose time. It would be a few days before they would come to 
a decision as to the railway question. They could in the meantime 
discuss some other questions. He thought that some results would 
surely be attained. 

Dr. Koo said that he need not dwell upon the tremendous diffi- 
culties encountered by the Chinese delegates in entering into these 
informal conversations. Even at present reports they were receiving 
from home were by no means reassuring. They were carrying on 
the conversations under great pressure. He thought that that cir- 
cumstance was well known to the Japanese delegation. One hope 
the Chinese delegates had entertained in meeting the Japanese dele- 
gates was to arrive at an early agreement on the question of the rail- 
way. An increased pressure from outside was brought to bear upon 
them when the railway question had not been made the first subject of 
discussion. Since taking an adjournment on that question after a 
short discussion nearly one week and a half had been spent in dis- 
cussing other questions. The Chinese delegates found their diffi- 
culties greatly increasing. They had, however, been hoping all along 
to reach an early settlement of this question and be relieved from 
the pressure upon them. 

Baron Shidehara said that he quite appreciated the position of his 
Chinese friends and that he could assure them of his earnest desire to 
do everything to expedite the solution of the question. If they were, 
however, to stop the discussions, even for a few days, that would 
create a bad impression in the popular mind, since they might very 
naturallv surmise that the negotiations had been unsuccessful. 

Dr. Sze said that if they adjourned and took up other questions the 
Chinese delegates w^ould have to give explanations, which they hated 
to do. If they suspended the discussions, then the Chinese delegates 
could say that they were only waiting until the Japanese delegates 
received' instructions from home. He did not think that it would 
serve any useful purpose to discuss other matters before they settled 
the railwav question. 

Baron Shidehara said that he hoped the Chinese delegates would 
believe him when he said that he was eagerly looking for an early 
settlement of the whole question. He would frankly say that, w^ithin 
the limits of the instructions in hand, he could not agree to the 
Chinese proposal. At the same time the Japanese delegates were 
prepared to do their best. They were very much afraid if they dis- 
continued the conversations the public might get false impressions. 
He thought it best not to lose time by doing nothing while the 
Japanese delegates awaited instructions. 

Dr. Koo asked whether they could adjourn until the Japanese 
delegation communicated with Tokyo. 

Baron Shidehara said that telegrams to Japan would now take 72 
hours in transmission. He thought that it would be better not to lose 
time. In the meantime the Japanese delegates would do their best 



97 

to find out some basis of agreement. It was their sincere intention 
to meet the wish of the Chinese delegates as far as possible. 

Dr. Wang said that they had been talking for two weeks ; that the 
position of the Chinese delegation was much more difficult than that 
of the Japanese delegation. 

Baron Shidehara said thej^ had been proceeding in the friendliest 
of spirit. Why should they not take up some other matter? He 
and his colleagues, for their part, would be glad to do their utmost 
to reach a decision. He did not wish to give the public the impres- 
sion that a critical stage in the negotiations had been reached. The 
Japanese delegation had not opposed, had not said anything against 
the Chinese proposition. Were his Chinese friends not ready to dis- 
cuss the question embodied in the fifth paragraph of his observations 
to-morrow ? 

Dr. Wang said that the position of the Chinese delegation would 
be made extremely difficult were they to take up other questions 
without at least coming to a tentative agreement. 

Baron Shidehara reminded the Chinese delegation that they had 
reserved paragraph 5 of his observations for future discussion. 

Dr. Koo said that it was only a secondary question, which would 
not arise before they had found out that cash payment could not be 
made. 

Baron Shidehara understood that the Chinese delegation has pro- 
posed to refer to Peking in regard to that question. 

Dr. Koo said he saw no necessity of doing so in a hurry. 

Baron Shidehara asked when they should meet again. 

Dr. Koo said that he did not desire to add to the difficulty already 
existing for the Chinese delegation. They might adjourn in order 
that the Japanese delegation might be able to communicate with 
Tokyo. The conversations might be resumed as soon as they had 
heard from Tokyo. 

Mr. Hanihara suggested taking up No. 5 of Baron Shidehara's 
observations to-morrow. The Japanese delegation desired to inform 
themselves further in respect of the question embodied in that para- 
graph. He suggested discussing that question the following day. 

Baron Shidehara remarked that if they met again the following 
day they could perhaps decide whether it would be advisable to ad- 
journ or not ; they could perhaps see clearly if they could come to an 
agreement. 

Dr. Koo said that in jDroposing adjournment, it was far from the 
intention of the Chinese delegation to press their Japanese colleagues 
unduly. Only, the procedure of the conversations had been closely 
followed by the Chinese people. They knew that the question of the 
railway had been twice taken up. The Chinese delegation could not 
wait until all other questions had been settled before a provisional 
understanding on the railway was reached. 

Baron Shidehara said that if they met the next day. the Japanese 
delegation might perhaps be able to define their position more fully, 
more explicitly. They could then decide to continue or adjourn for 
a few days. 

Dr. Koo inquired if, in other words, Baron Shidehara desired to 
have another meeting on the question of the railway to define the 
Japanese views. 



i)S 



Baron Shidehara said that the Japanese delegation could perhaps 
decide overnight what to do in the situation. He appreciated the 
position of his Chinese friends and would do his best to help them. 

Dr. Koo said that the Chinese delegation agreed, in the hope that 
a provisional agreement would be had at the next meeting. 

PRESS COMMUNIQUE. 

The press communique was agreed upon (Annex I) and the meet- 
ing adjourned at 5.40 p. m. until 3.15 p. m. to-morrow. 

Washington, D. C. Deceniber 13^ 1921. 

SJC-ll.] 

Annex I. 

December 13, 1921, 

[For the press.] 

The eleventh meeting of the Chinese and Japanese delegates rela- 
tive to the question ot Shantung was held in the governing board 
room of the JPan American Union Building. The discussion on the 
question of Kiaochow Tsinan Railway was continued. The meeting 
adjourned at G oVlock this afternoon until 3.15 o'clock to-morrow 
afternoon. 



TWELFTH MEETING. 

Twelfth meeting, held in governing board room, the Pan American 
Union Building, Washingt<Dn, D. C. at 3.15 o'cloi-k in the afternoon 
of Wednesday, December 14, 1921. 

present. 

Chma. — Dr. Sao-Ke Alfred Sze, Dr. V. K. Wellington Koo, Dr. 
Chung Hui AYang. Secretaries: Mr. Tsai, Mr. Tung-Fan Hsu, Mr. 
C. H. Zee, Mr. Chuan Chao. Mr. Telly Howard Koo. 

Japan. — Baron K. Shidehara, Mr. M. Hanihara, Mr. K. Debuchi. 
Secretaries: Mr. S. Saburi, Mr. E. Kimura, Mr. H. Saito, Mr. T. 
Shiratori. 

Also present as observers: 

The tjnited States of America. — Mr. John Van A. MacMurray, 
Mr. Edward Bell. 

The British Empire. — The Rt. Hon. Sir John Jordan, G. C. I. E., 
K. C. B., G. C. M. G. ; Mr. M. W. Lampson, M. V. O. 

the question or the railway. 

Baron Shidehara said that at the last meeting he had assured his 
Chinese friends that the Japanese delegates would do their best to 
meet the Chinese point of view. They fully appreciated the Chinese 
position. At the same time, as he had very frankly said, the Japanese 
delegation had no instructions authorizing them to give up the plan 
of the joint enterprise; but since the scope, nature, and substance 
of the Chinese counterproposition had been made sufficiently clear, 
the Japanese delegates had in fact worked out a plan which might 



99 

be taken as a substitute for the original Japanese proposal of joint 
enterprise. It had been his intention, first, to obtain authorization 
from Tokyo as to a new proposal, and then to lay it before the Chinese 
delegates for their consideration. But, being sincerely anxious to 
meet the desire of the Chinese delegates, they had decided to reverse 
the order of procedure originally in their mind, and to present im- 
mediately at this meeting a tentative plan of adjustment respecting 
the kShantung Railway which might serve as a substitute for the 
original plan of a joint enterprise, before submitting it to Tokyo 
for approval. He should, perhaps, read the plan : 

" (1) Ja]3aii to hand over to China, as soon as practicable, and 

not later than months \jBaron Shideharci said, six or eight 

months, for instance; that point could he pxed late?''] after the com- 
ing into force of the agreement on the whole Shantung question, the 
Shantung Hallway and its branches, together with all the properties 
appurtenant thereto, including wharves and warehouses, it being un- 
derstood that the question of the mines appurtenant to the railway 
shall be set apart for separate consideration. 

" (2) China to pay to Japan the actual value of the Shantung 
Railway properties as represented by the Reparation Commission 
figure, plus the amount which Japan, during the period of her ad- 
ministration of the railway, has actually expended for permanent 
improvements on and additions to the railway properties, less a 
suitable allowance for depreciation. It is understood that no charge 
will be made for the transfer to China of wharves and warehouses 
mentioned in the preceding clause, except for such permanent im- 
provements on and additions to them as may have been effected by 
Japan. A Sino- Japanese joint commission to be appointed for the 
purpose of making just and fair valuation of the railway properties 
to be handed over to China. 

" (3) To cover the payment under the preceding clause, China to 
conclude a loan agreement with Japanese capitalists on the basis of 
the terms embodied in railway loan agreements of comparatively 
recent dates which she has entered into with various foreign capi- 
talists. Negotiations for the loan agreement to be commenced as 
soon as possible and to be concluded within six months \ Baron Shide- 
hara said that he gave six months tentatively'] after the coming into 
force of the agreement on the whole Shantung question." 

Baron Shidehara added that it was practically on the same lines 
as had been discussed yesterday. 

Dr. Sze said that he thought the first article was similar to^ the 
Chinese proposal of yesterday, and he wondered whether the word- 
ing could not be so altered as to make it clear when the transfer of 
the railwaj^ Avould be completed. 

Baron Shidehara Avondered whether the wording was not clear 
enough. Japan was to transfer to China the railway within a speci- 
fied period. It was a technical question how many months it would 
take to complete the transfer. Tie had suggested six or eight. He 
did not tliink that that was very long. 

Dr. Sze asked whether the phrase "not later" could noti be 
changed to something like " transfer shall be completed." As it 
Avas, only the commencement of the transfer Avas defined. 

Baron Shidehara asked whether Dr. Sze had any idea as to the 
duration necessary for the transfer. 



100 

Dr. Sze remarked that the line Avas 289 miles lon^. If they made 
preparations in good time, six months would be sufficient. That 
would mean practically nine months from now. He was counting 
upon about three months to pass before the agreement was reached 
and ratified. Therefore six months would give ample time. 

Baron Shidehara said that it was after all a question of phrase- 
ology. He had no preference to any particular wording. If the 
agreement were to take the treaty form, terminological improve- 
ments Avould have toi be made, but he had to confess that he had no 
technical knowledge to pass any judgment as to the length of time 
to be required for the completion of the transfer. 

Dr. Sze suggested that six months should be tentatively adopted. 

Baron Shideliara said that he sliould like to refer that question 
to some technical expert. 

Dr. Sze said that a Chinese technical expert had advised him that 
six months would give ample time. As soon as an agreement was 
reached, the inventory of the properties would have to be made. 
After that the tran.sfer could com})letely be effected in six months. 

Baron Shidehara proposed that it should be nine months, tenta- 
tively. He could not tell just now. without any technical knowl- 
edge, what would be the most adequate length of time, but he would 
like to make it nine months, subject to modification. 

Dr. Sze agreed. He. continuing, said that he Avould like to add 
the words "similar properties" after '"wharves and warehouses." 

Baron Shidehara asked what properties Dr. Sze had in mind in 
making that pro2:)osition. 

Dr. Sze said that after the inventories were made it may be 
found that there were some properties Avhich the Germans did 
not include among the railway properties, but which had come to 
be counted among such properties under the Japanese occupation. 
He. however, lacked knowledge as to the aatual situation. 

Baron Shidehara said that the Japanese delegation had no objec- 
tion to the inclusion of such phrase, but the words " properties ap- 
purtenant thereto*' appearing in his draft might be sufficient. 

Dr. Koo observed that the whan^es and warehouses were, under 
German regime, not included in the raihvay properties. They were 
regarded more as facilities for ships. They had, however, been 
decided to be discussed separateh^ from other public properties at 
the request of Mr. Hanihara the other day. The Chinese delegates 
did not know whether, apart from those two establishments, there 
were other properties which came under the same category, but 
they desired to make provisions for them in order to avoid practi- 
cal difficulties. 

■Baron Shidehara said that he had no objection to it. 

It was decided to add the phrase, " and other similar properties " 
after " wharves and warehouses." 

It was also agreed, at the instance of Baron Shidehara, that " the 
Shantung Railway " should be changed to " the Tsingtao-Tsinanfu 
Railway." 

It was also agreed that the phraseology of the whole paragraph 
should be so changed as to make it clear that the completion of the 
transfer would be effected in nine months, reading as follows : 

"(1) Japan to transfer to China the Tsingtao-Tsinanfu Railway 
and its branches, together with all the properties appurtenant thereto, 



101 

including wharves and warehouses and other similar properties, it 
being understood that the question of the mines appurtenant to the 
railway shall be set apart for separate consideration, the said transfer 
to be completed as soon as practicable and not later than nine months 
after the coming into force of the agreement of the whole Shantung 
question." 

Dr. Koo said that perhaps it would be more conducive to clear 
understanding if exact figures were given in the second paragraph 
instead of saying, " the Reparation Commission figure." 

Baron Shidehara remarked that the Reparation Commission figure 
was only tentatively fixed ; it was not final, and therefore it was very 
difficult to give exact figures. 

Mr. Debuchi stated that he understood that according to the tenta- 
tive arrangement by the Reparation Commission the figures stood at 
69,000,000 gold marks, including the value of the mines. He added 
that the exact figures ^for the railway itself were 53,406,141 gold 
marks. 

Dr. Koo said that he might be mistaken, but his understanding was 
that the reparation amount had been agreed to by the Japanese rep- 
resentatives on that commission. 

Mr. Debuchi said that that was tentatively agreed to by the Jap- 
anese and'other delegates. 

Dr. Koo said that not being party to the treaty of Versailles, and 
consequently not represented upon the Reparation Commission, it was 
naturally very difficult for the Chinese delegates to find out the exact 
amount of liabilit}^ to be decided by the committee. He desired to 
set down in figures the exact amount instead of such an indefinite 
statement as the reparation figures. 

Baron Shidehara suggested that perhaps that point could be made 
clear by an exchange of notes. It would be very awkward to put in 
the figures which were not final but only tentative. 

Dr. Koo asked whether it was the understanding of the Japanese 
delegates that the figures might be modified. 

Baron Shidehara replied in the affirmative. 

Dr. Koo stated that he had understood that the amount had defi- 
nitely been accepted by Japan and other countries but tentatively 
by Germany. 

Mr. Debuchi said that he was not sure. He understood that the 
agreement was only tentative. 

Dr. Koo stated that if the exact figures were not given in the 
agreement the Chinese delegates would be in an uncertain position. 

Baron Shidehara inquired what the idea of the Chinese delega- 
tion was as to exchanging notes clearly setting forth what had taken 
place in the Reparation Commission in Paris. It would be awkward 
to put exact figures in the agreement which were merely tentative. 

Dr. Koo then pointed to the phrase at the end of paragraph 2, 
providing for the method of valuation of the railway properties. 
He wondered whether that valuation would be confined to the per- 
manent improvements and additions. 

Baron Shidehara replied that, as the Japanese delegation under- 
stood, they would apply only to the improvements and additions. He 
added that he had adopted a more comprehensive phrase because the 
reparation figure was only tentative. 



102 

Dr. Koo said that when the Chinese cleleo;ates had suggested the 
term " reparation figure " they had in mind the definite figures. If 
those figures should be modified, China would be placed in an un- 
favorable position, not being represented on the Reparation Com- 
mission. 

Baron Shidehara remarked that possibly she might be placed in 
a favorable position. 

Dr. Koo said that depended upon which way the figures might 
be altered. 

Baron Shidehara said that he had no definite knowledge on the 
question, and suggested that he send a telegram to Paris to ascer- 
tain what had transpired in the Reparation Commission. 

Dr. Koo said that perhaps he had not made his position suffi- 
ciently clear. When the Chinese delegation referred to the repara- 
tion amount, they had in mind only the exact figures of 53,406,141 
gold marks. They could in reality only be concerned with the 
definite figures. 

Baron Shidehara said that he might be wrong; the figure might 
have become definite; but his information was that the figures were 
not final. He would refer to Paris for exact facts. 

Dr. Koo said that the intention of the Chinese delegation was 
to pay 53,406,141 gold marks plus value of improvements'and addi- 
tions. It was not their intention to pay whatever the Reparation 
Commission might determine. 

Baron Shidehara suggested a formula reading : " The Reparation 
Commission figure, which stands at such and such a sum." 

Dr. Koo said that the Chinese delegates were not concerned with 
the Reparation Commission. What they were concerned with was 
the exact amount. 

Baron Shidehara observed that if the figures alone were given and 
no mention was made of the Reparation Commission, then it would 
not be clear wh}?- the figures were stated. He then suggested another 
formula running : "' The amount to be credited to Germany on 
reparation account ; namely. 53.406.141 gold marks." 

Dr. Koo said he was not sure whether that would help to clarify 
the situation. 

Baron Shidehara said that perhaps the Chinese delegates did not 
like reference to the Reparation Commission. 

Dr. Koo stated that the mention of the Reparation Commission was 
unnecessary. He then proposed a new formula, reading : " The actual 
value, , which is agreed to be ." 

Sir John Jordan said to Dr. Koo that he and his colleagues did not 
quite see the point the Chinese delegates were trying to make. He 
would have thought that if Japan had to pay more than the stated 
amount, then China would have to pay more; if Japan were to pay 
less, China would pay less. 

Dr. Koo said that the Chinese proposal was not to pay whatever 
Japan would pay to Germany; what the Chinese delegates had ac- 
cepted was only the amount of the reparation figures themselves. 

Baron Shidehara asked Mr. MacMurray whether he did not pos- 
sess some information as to the decision of the Reparation Commis- 
sion. 

Mr. MacMurray said that what information he had was based 
upon a summary "which stated that the value of the Shantung Rail- 



103 

way was definitely decided upon on June 25 last, but that was only 
a summary of what had transpired, and he was not sure as to the 
exactness of the information. 

Baron Shidehara said that he had been given to understand that 
the figures were only tentative. 

Dr. Koo stated that in response to a formal inquiry by China the 
Reparation Commission answered in a letter that the figures, which 
stood at 53,406,141 gold marks, which coincided with the figures 
given by Mr. Debuchi, had been accepted officially by the repre- 
sentatives of Japan and other countries and unofficially by the (jer- 
man representative. The Chinese delegation was not in a position 
to comment upon the understanding of the Japanese delegates in the 
matter, but they had those definite figures in mind in discussing 
the question of what China should pay. 

Dr. Sze understood that the agreement at the Reparation Commis- 
sion was tentative in the sense that it had to be approved by the 
ambassadors' conference. That was a mere matter of formality. His 
information was that the agreement was referred to the ambassadors' 
conference on May 17. 

Dr. Koo said that, as Mr. Debuchi had stated, the figures had been 
accepted by Japan and other powers. But this discussion of the 
history of how the figures came to be adopted by the Reparation Com- 
mission was in the nature of a digression. The point the Chinese 
delegates wanted to make was that they had only definite figures in 
mind. It did not make much difference how or by whom the figures 
liad been fixed. 

Baron Shidehara agreed with Dr. Koo's opinion on the last point. 

Dr. Koo, continuing, said that the mention of the definite figures 
would enable the Chinese delegates to proceed at once with the task 
of providing funds for meeting the major part of the cost to China. 

Baron Shidehara asked whether there was much difficulty on the 
Chinese part to adopt the formula last suggested by him. 

Dr. Koo said that he didn't quite understand why Baron Shidehara 
persisted in mentioning the Reparation Commission. He thought the 
specific figures would be all that was necessary. 

Baron Shidehara said that if no mention was made of tlie Re])ara- 
tion Commission, tlien tlie word " plus " in the passage in question 
would become meaningless. 

Dr. Sze suggested to substitute " in addition to " for " plus." 

Dr. Koo suggested that adoption of the formula " which shall 
consist of such and such figures, plus, etc." 

Baron Shidehara feared that the omission of any allusion to the 
Reparation Commission might create misunderstandings on the part 
of the public, who would not know what those figures stood for. 

Dr. Koo still thought that that was unnecessary. 

Baron Shidehara said that the meaning would be clear by adopt- 
ing the formula he had just proposed, running " the Reparation Com- 
mission figures, which stand, etc." 

Dr. Koo said that that point did not seem to him to be so forceful 
as it might appear to be. The figures would be taken as represent- 
ing the properties in the main. The public would not misunder- 
stand. 



104 

Baron Shidehara said that he was not quite sure about that. The 
public might suppose that the sum represented a gratuitous payment 
on the part of China. 

Dr. Wang suggested the formula, " which is hereby agreed to be." 

Baron Shidehara said that he had no objection in mentioning fig- 
ures, but he thought it Avould be useful to give an explanation as to 
the meaning of the figures. It was. after all, a very minor point — a 
question about the form of wording. 

Mr. Hanihara desired to make it clear that Japan was not taking 
that amount for themselves, but that is was to go to Germany. The 
public did not know the facts of the case, and it would not be fair 
to Japan not to make clear the meaning of the figures. 

Baron Shidehara asked Avhether the reason why the Chinese dele- 
gates had been objecting to the mention of the' Reparation Commis- 
sion was because China was not represented on that commission. 

Dr. Sze said that, as the Chinese delegation had stated before, 
there Avere some Chinese shareholders. If the Reparation Commis- 
sion was mentioned, then those shareholders w^oulcl say that the 
value of the Chinese shares ought to have been deducted from the 
reparation amount. The Chinese public would hardly be reconciled 
on that point. That was a strong reason why the Chinese delegates 
had persisted in the elimination of the reference to that commission. 

Baron Shidehara said that they were going to set down the figures. 
They could not. therefore, fool the public. He added that the word- 
ing he had used in his draft agreement w^as the one which had been 
accepted yesterda}". He desired that that should be adopted as it 
was, if there were no serious objections on the part of the Chinese. 

Dr. Koo responded that the Chinese delegates had used the phrase 
" reparation amount ■' simply for the purpose of identifjang what 
they meant. With a view^ to avoiding any possible doubt in the public 
mind, he suggested the use of the phrase " actual value which is as- 
sessed at so many gold marks." 

Baron Shidehara said that he did not think that that would clarify 
the meaning. 

Dr. Koo said that he did not know whether they were to discuss 
the point any longer. As a matter of fact, he did not think that the 
public would entertain any doubt or misvmderstanding. All such 
instruments should be couched in concise language. If it was found 
necessarj^ by the Japanese delegation to make explanations,, some 
other method, such as the issue of a declaration or a statement, could 
be resorted to. 

Baron Shidehara said that if the Chinese delegation were to raise 
the question of the shareholders, and on that account proposed to 
modify the reparation figure, that would destroy the whole agree- 
ment made by the Reparation Commission. 

Dr. Sze explained that that was only one of the reasons. If the 
deduction of the amount of the Chinese shares was not made, the 
Chinese delegation would have to bear the brunt of popular pressure 
at home. They had accepted the explanation of the Japanese dele- 
gates yesterday, so they had to seek some other means of palliating 
the said pressure. The Chinese shareholders would naturally prefer 
receiving the value of the shares at once instead of taking the trouble 
of collecting that from Germany, 



105 

Baron Shidehara suggested a new formula running : 

" , consisting of the sum of 53,406,141 gold marks 

which is the assessed value of such railway properties as were left 
behind by the Germans." 

After consultation among themselves, the Chinese delegates agreed 
to Baron Shidehara's formula, with the addition of the phrase " or 
its equivalent " after " gold marks." 

Dr. Koo suggested adding "less a suitable amount of deprecia- 
tion " after " except for such permanent improvements on and addi- 
tions to them as may have been effected by Japan." 

Baron Shidehara agreed. 

The first part of paragraph 2 was amended to read as follows : 

" China to pay to Japan the actual value of the Tsingtao-Tsinanf u 
Railway properties, consisting of the sum of 53,406,141 gold marks, 
or its equivalent, which is the assessed value of such railway proper- 
ties as were left behind by the Germans, plus the amount which 
Japan, during the period of her administration of the railway, has 
actually expended for permanent improvements on and additions to 
the railway properties, less a suitable allowance for depreciation. 
It is understood that no charge will be made for the transfer to China 
of wharves and warehouses and other similar properties mentioned 
in the preceding clause, except for such permanent improvements on 
and additions to them as may have been effected by Japan, less a 
suitable amount of depreciation." 

Dr. Koo desired to comment upon two points contained in the sec- 
ond clause of Baron Shidehara's tentative plan. The first point was 
the valuation of the railway properties to be made by the Sino- 
Japanese joint commission. He wanted to have it made clear that 
such valuation should be confined to improvements of and additions 
to the railway properties. The second point was the organization 
of a joint commission. He thought it was more desirable that, in 
appointing the joint commission, experts of some neutral nationality 
should be chosen with the mutual consent of Japan and China. He 
did not want to give the impression that there existed any supposi- 
tion on China's part that the work of valuation could not be satisfac- 
torily carried out without the presence of neutral experts, but lie 
thought it was usual to have a third party chosen with mutual con- 
sent. In case honest doubt existed on either side it would be ex- 
pedient to have a machine right on the spot to consult, and it was 
possible that there might arise honest differences of opinion. In such 
case the presence of a neutral expert would facilitate the discharge 
of duties by this commission. The question of valuation appeared to 
him to be a highly technical matter, and it was desirable that an ex- 
pert of a third nationality should be called in. 

Baron Shidehara said that he hoped there might be practically 
no differences between the Chinese and Japanese experts, but that if 
the commissioners should really be unable to arrive at any definite 
valuation in common accord, Japan and China could then consider 
and decide what should be done. 

Dr. Koo said that he was afraid a great deal of time would be 
lost in that way; moreover, the work of the joint commission would 
not be confined to the valuation. There might be honest difference 
of views ; for instance, as to what were improvements and what not. 



106 

Baron Shidehara did not think these matters could present insur- 
mountable difficulties. It was not necessary that an expert of a neu- 
tral nationalit}^ should be chosen from the beginning. If the joint 
commission should be unable to reach definite figures, it would then 
be time enough either to call in neutral assistance or resort to some 
other means. 

Dr. Sze said that the Chinese delegation wished to avoid giving 
people the idea that if the joint commission could not agree the whole 
adjustment of the railway question would have to wait. For the sake 
of smooth working and speedy conclusion, it seemed to him highly 
desirable to have a provision to meet the emergency of honest differ- 
ence arising. 

Baron Shidehara said he was afraid thp.t such a provision might 
create misunderstanding in Japan. It Avould give an impression as if 
both sides had an idea from the start that they Avere going to dis- 
agree. The idea of bringing in a neutral expert to decide their own 
differences could never create a good impression. 

Dr. Koo said that considering the nature of the work to be per- 
formed by the commission, Avhich was purely technical, he hoped 
that appointment, in the composition of the proposed commission, of 
a neutral expert would never give rise to any misunderstanding. 

Baron Shidehara said that China had her experts and Japan had 
hers. He did not see why there should be insoluble differences if 
they worked together with honest purpose. It was, indeed, hardly 
worth while to invite the presence of a neutral. Experts of Japan 
and China ought to be able to settle any differences that might arise 
in this connection. 

Dr. Koo observed that to meet the wishes of the Japanese delega- 
tion he would suggest a plan Avhereby disputes and differences be- 
tween the Chinese and Japanese commissioners might be referred to 
expert arbitrators chosen by mutual agreement. 

Baron Shidehara uidn't think such a plan necessary. Of course, 
in case the commissioners could not agree on any point it would be- 
come necessary for the two Governments to decide upon the proper 
means. 

Dr. Koo said the Chinese plan was to decide upon that means while 
the two Governments were discussing the matter in an amicable 
spirit. When the differences actually arose they might not be in the 
best mood to come to an agreement. 

Baron Shidehara said he was afraid such a plan might create an 
impression that both parties had expected differences. The solution 
of the whole question of Shantung was being sought in a spirit of 
conciliation and friendliness. Even if technical differences should 
arise, they should not prove too difficult to compromise. It would 
create an unfortunate impression upon the people of Japan to have a 
neutral arbitrator or anything like that. 

Dr. Koo said he understoocTthat as to the idea itself they were not 
far apart. In the case of dispute, and disputes would arise even 
between the best of friends, it would be the part of wisdom to make 
provision to meet such a contingency. He wondered if his Japanese 
colleagues would not agree in substance to the Chinese proposal and 
make "the matter the subject of separate notes to be exchanged be- 
tween the two Governments. He had no desire other than to make 



107 

a proper business arrangement, so that technical questions might not 
furnish any ground for misgivings. In other words, the Chinese 
delegation were ready to accept Japanese proposals for the joint 
commission on the understanding that a provision for referring tech- 
nical differences to neutral arbitration should form the subject of 
notes to be exchanged between the two Governments. 

Baron Shidehara asked further if it was the wish of the Chinese 
delegation to refer differences to arbitration. 

Dr. Koo said that the nature of the function of the joint commis- 
sion was very technical. He thought it was advisable to provide for 
arbitration, to which such technical differences might be referred. 

Dr. Sze said that even with the best" of intentions experts were 
apt to differ from each other very- much. To cite an instance, it had 
been proposed to build the Yellow Kiver bridge in China. The fig- 
ures submited by different bidders, even though of the same nation- 
ality, were widely different. The Chinese delegation wished to 
settle the whole question once for all. If no proper provision were 
made, it' might cause, not only delay but misgivings, which both the 
Japanese and Chinese delegations were anxious to avoid. It was 
not proposed to insert this provision in the agreement itself, but that 
it should form the subject of separate notes. 

Baron Shidehara said it would be practically the same whether it 
was made a separate note or placed in the agreement itself. The 
remark he and Mr. Hanihara had made would apply just the same. 
Moreover, it did not look nice that complications should be antici- 
pated from the beginning. 

Dr. Sze said the provision for arbitration would not necessarily 
create a bad impression. Japan had several arbitration treaties, he 
understood. 

Baron Shidehara said that it was not a ver}^ important question. 
It was merely a question of policy — a technical question. He did not 
see. however, why they should from the outset contemplate serious 
disputes which would have to be referred to arbitration. 

Dr. Sze said the Chinese delegation had in mind not simply dis- 
putes, but more especially the question of valuation. 

Baron Shidehara said that those matters ought not to be difficult 
for the commissioners to compromise. If they knew there was a 
machine ready to take up their differences, they would be slow to 
compromise. 

Dr. Koo admitted that the spirit of conciliation and compromise 
on both sides would prevent any occasion arising to resort to the 
machine, but still it would be the part of wisdom to have a provision 
in case of difference of views actually arising. 

Baron Shidehara said that he hoped that in a procedure like this 
each case would be decided on its own merits. Should the experts 
fail to agree, let the two Governments take up the question and 
decide it from a broader point of view than from a technical stand- 
point. He was, himself, really afraid misgiAangs might be created 
in the popular mind of Japan if such a provision as suggested by 
the Chinese delegation were to be adopted. The Japanese people 
felt that Japan and China should be able to adjust any differences 
between them without calling in neutral arbitrators or judges. 

Dr. Koo said he was not sure if he made it clear to the Japanese 
delegation that the Chinese proposal would form merely a separate 



108 

provision. If the joint commission were animated by a spirit of con- 
ciliation and compromise, they would be able to settle all questions 
without the necessity of utilizing such a provision. 

Baron Shidehara suggested that the discussions should be finished. 
It was nearly 5.30. 

Dr. Koo said that in regard to the third paragraph of Baron 
IShidehara's plan, the question of the loan would not arise if China 
! could reimburse Japan in cash. 

Baron Shidehara asked whether it was the idea of the Chinese 
delegates to leave paragraph 3 undecided. That was a point to 
\Nhich the Japanese delegation attached the greatest importance. 

Dr. Koo replied that the idea of the Chinese delegation was to set 
aside for the moment the discussion of the question of the method 
of payment. 

Baron Shidehara said that the Japanese delegation placed so much 
importance to this question that, if his Chinese friends intended to 
leave it undecided, it would be very difficult for the Japanese dele- 
gates to agree to the whole plan. 

Dr. Koo said that in suggesting to set aside the question of the 
loan for the moment, the Chinese delegates merely desired to make 
it clear that China would like to pay Japan as soon as possible. 
He understood that what Japan desired China to do was that she 
would discharge her duties as rapidly as possible. 

Baron Shidehara said that that was not exactly the Japanese 
/position. Japan desired to retain certain interests in the railway to 
I the same extent as various foreign capitalists had in regard to 
I various Chinese railways. 

Dr. Sze said that the Japanese delegates would not object if China 
could pay in cash. 
/ Baron Shidehara said that Japan did not desire it ; that what she 
wanted was to retain certain interests in the railway for Japanese 
capitalists. 

Dr. Sze asked if that was the case even if China would make a 
cash payment. 

Baron Shidehara said that he had to repeat what h^ had said. 

Dr. Sze said that the policy of China was not to make any new 
railway loan, especially in the present case. Chinese bankers had 
offered a loan, and it might not be necessary for them to float any 
foreign loans. He added that the position of the Chinese delegation 
was very difficult. 

Baron Shidehara said that most of the railways in China had 
foreign interests in them. If Japanese capitalists ^Yere excluded 
from having like interests, it would be felt that they were receiving 
discriminatory treatment. 

Dr. Sze said that foreign interests were represented in older rail- 
ways, but it was not the policy of China to resort to any mor^ foreign 
loans if she could possibly help it. 

Baron Shidehara said that China had contracted foreign loans 
for her railways in 1914, and perhaps even later. 

Dr. Sze said that if China was going to take loans from other 
countries and excluded the Japanese financiers from participating 
in them, criticism might arise that discriminatory treatment was 
being practiced, but when the Chinese bankers were to finance the 
enterj)rise no such complaints could be advanced. 



109 

Baron Shidehara said that the Chinese delegation were entirely 
disregarding the history of the railway. In transferring it to 
China it was only natural that Japan should desire to retain inter- 
ests in the railway to the same extent as foreign capitalists have in 
other railways. He added that he would like the Chinese delegates 
to understand that it was extremely difficult for him to agree to any 
other plan. This loan arrangement itself was already a great con- 
cession on the part of the Japanese delegation. However, if the 
Chinese delegates could not decide to-day, it would be better to ad- 
journ the discussion until to-morrow. He only desired the Chinese 
delegates to understand that he placed great importance on that 
phase of the question. 

Dr. Sze said that the Chinese position was very difficult. His own 
people had offered the loan. 

Baron Shidehara urged the Chinese delegates to realize the stand- 
point of the Japanese delegates. While he quite understood the 
Chinese position, he could not recede from the position he had taken. 

The press communique was agreed upon (Annex I), and the meet- 
ing adjourned at 5.50 p. m. until 3.15 p. m. to-morrow. 

Washington, D. C, Decemher llf, 1921. 



SJC-12.] 

Annex I, 



December 14, 1921. 



[B^or the press.] 
Issued 1)1/ the Chinese and Japanese delegations. 

The twelfth meeting of the Japanese and Chinese delegates rela- 
tive to the question of Shantung was held at 3.15 p. m., in the govern- 
ing board room of the Pan American Union Building. The discus- 
sion on the question of Tsingtao Tsinan Railway was continued, and 
they have approached an understanding on several features of this 
question. The meeting adjourned at 5.30 this aftefnoon until 3.15 
to-morrow afternoon. 



THIRTEENTH MEETING. 

Thirteenth meeting, held in governing board room, the Pan Amer- 
ican Building, Washington, D. C., at 3.15 o'clock in the afternoon of 
Thursday, December 15. 1921. 

PRESENT. 

China.— Dv. Sao-Ke Alfred Sze, Dr. V. K. Wellington Koo, Dr. 
Chung Hui Wang. Secretaries : Mr.' Tsai, Mr. T. C. Yen, Mr. Tung- 
Fan Hsu, Mr. C. H. Zee, Mr. Telly Howard Koo, Mr. Chuan Chao. 

Jajmn.—Bd^Yoii K. Shidehara, Mr. M. Hanihara. Mr. K. Debuchi. 
Secretaries: Mr. S. Saburi, Mr. E. Kimura, Mr. H. Saito, Mr. T. 
Shiratori. 

Also present as observers : 
93042—22 8 



110 

The United States of America. — Mr. John Van A. MacMiirray, 
Mr. Edward Bell. 

The British E77ipire.—The Ei^ht Hon. Sir John Jordan, G. C. I. 
E., K. C. B,, G.C. M. G. ; Mr. M. W. Lampson. M. V. O. 

QUESTION or THE RAILWAY. 

Dr. Sze thought that both delegations left the last passage of para- 
graph 2 of the Japanese counterproposal undecided. Dr. Koo had 
proposed the provisions of arbitration in that connection. The Chi- 
nese delegates still thought it best to have some such provision, 
although they hoped that no diiferences would arise in the valuation 
of the railway properties. Inasmuch as they would negotiate in a 
conciliatory and friendly spirit, there might in fact be no need of 
such provision. However, even among technical experts discrepan- 
cies in estimates might arise. Therefore they thought that a provi- 
sion of that nature would be ver}'^ useful. 

Baron Shidehara said that in order to meet the Chinese desire he 
Avould propose tentatively — though the idea Avas not yet quite definite 
even in his own mind — that there should be an exchange of notes 
somewhat in the following sense : 

"• Should the joint commission fail to reach an agreement on the 
valuation of the Tsingtao-Tsinanfu Railway properties under clause 

of the agreement signed this day the matter shall be taken 

up by the two Governments for discussion and adjustment by means 
of diplomacy. In the determination of the points at issue the two 
Governments shall, if necessary, olitain recommendations of an ex- 
pert of a third power, who shall be designated in mutual agreement 
with each other.'- 

Dr. Koo said that the gist of Baron Shidehara's counterproposal 
was acceptable, with certain modifications Avhich he desired to sub- 
mit for the consideration of the Japanese delegation. Firstly, this 
joint commission would deal with perhaps other questions than the 
valuation, such as what constituted permanent improvements and 
additions. There might also arise differences of opinion as to what 
particular properties should be transferred to China. Therefore it 
seemed to the Chinese delegates to be desirable to give more latitude 
to the functions of the joint commission. He asked whether it would 
be agreeable to Baron Shidehara to add the phrase " the question of 
valuation or transfer of the Tsingtao-Tsinanfu Railway properties 
or other questions arising therefrom," instead of simply stating " the 

valuation, ." That was suggested merely to insure the 

usefulness of the commission for their purpose. As regards the 
designation of an expert of a third power, it would be A^ery useful to 
have one appointed in advance, so that he might be immediately 
available when needed. By that arrangement a great deal of time 
would be saved. Although he did not propose to make exhaustive 
provisions for all possible contingencies, he thought it most practical 
to have a neutral expert designated in advance. Then, even with 
expert recommendations the Governments might find it difficult to 
agree; so he would add a clause which would provide that "the 
differences should be referred to arbitration by experts of a third 
power to be designated with the mutual consent of the parties con- 
cerned."' 



Ill 

Baron Shidehara asked whether Dr. Koo proposed to change the 
wording of clause 2 in his original proposal. 

Dr. Koo answered in the affirmative. 

Baron Shidehara reminded Dr. Koo that his present plan was to 
be executed by an exchange of notes. Clause 2 of his proposal con- 
cerned only the valuation of the railway properties. Dr. Koo's 
present suggestion, therefore, involved a change of the original plan. 

Dr. Koo said that they needed not. perhaps, go into so much detail. 
A phraseolog;^^ which covered all points might be used. 

Baron Shidehara said that the point Dr. Koo had been trying to 
make was covered by the word " valuation," 

Dr. Koo observed that differences might arise as to what constituted 
permanent improvements or additions. 

Baron Shidehara said that if they were not improvements they 
would be deducted from the account and no question of valuation 
M^ould arise. 

Dr. Koo said that about the majority of improvements there would 
be no question, but that there might be some few about which the 
question might properly arise whether they were improvements or 
not. That was not strictly a question of valuation. 

Dr. Sze said he would try to explain by taking an example. Sup- 
pose a car broke a window pane and that it was replaced ; that would 
be a replacement and not improvement. To decide whether some- 
thing was merely a replacement or an improvement was ijot exactly 
a question of valuation. 

Baron Shidehara stated that what they were at present concerned 
with Avas the valuation of property. He did not think that China 
wanted to take over properties of no value to herself. 

Dr. Sze said there was difference between an improvement and a 
replacement. The latter was a technical term in railway business. 
>■ Baron Shidehara said that such questions did not arise in regard 
to the question of A^aluation. There was no use of discussing such a 
point academically. How much China had to pay Japan — that was 
a question of valuation. 

Dr. Sze said suppose an old car was broken ; it would be necessary 
to have a new one. That would be a replacement and Avould not 
invoh^e a question of valuation. Such matters should likewise be 
decided by the commission. 

Baron Shidehara said that the question of whether something was 
an improvement or not would naturally be involved in the question 
of how much China should pay ; it would only have to be considered 
in connection Avith the question of A^aluation ; there would be no need 
of settling that previously to actual valuation. 

Dr. Sze said that such determination might precede valuation. 

Baron Shidehara then proposed a formula reading: " 

on any matter connected with the A^aluation of the raihvay proper- 
ties, etc." 

Dr. Koo asked whether Baron Shidehara would have any objec- 
tion to saying: " on any question connected with the 

transfer of the Tsingtao-Tsinanfu Railway properties or any ques- 
tion connected Avith the valuation of the railway properties." 

Baron Shidehara wondered whether he might ask AAdiat Dr. Koo 
had in mind when he spoke of the question of transfer. 



112 

Dr. Koo said that he had nothing particular in mind. He had 
offered that suggestion merely to make sure that there was a ma- 
chine ready in case of differences. The whole idea was to expedite 
the execution of the agreement and to prevent any difficulties even 
necessitating reference to their respective Governments. 

Baron Shidehara said that he did not perceive the point Dr. Koo 
was trying to make. There could be no question of transfer unless it 
was a question of what property was to be handed over to China. 

Dr. Koo said that mainly Baron Shidehara was in the right. How- 
ever, divergences of view might arise. There might, also, be proper- 
ties which would raise doubt. He could assure the Japanese delegates 
that he had entertained no hidden desires. He only thought that it 
would be wise to insert some provision in case of contingency. 

Baron Shidehara asked whether the Chinese delegates would have 
any objection to taking off the Avhole paragraph 2 and embody the 
jDrovision in the notes under contemplation. According to the origi- 
nal wording the joint commission would be intrusted with the task of 
taking valuation only. According to Dr. Koo's proposal, however, 
the function of the commission would go much further. 

Dr. Koo said he would accept Baron Shidehara's suggestion with 
a slight modification which would read: " on any ques- 
tion relating to the transfer of the Tsingtao-Tsinanfu Eailway 
properties and on any matter connected with the valuation of the 
jDermanent improvements thereon or additions thereto." 

Baron Shidehara said that the whole wording of his original plan 
was to be modified to meet the Chinese wishes and proposed a for- 
mula, reading : 

"A Sino-Japanese joint commission shall be appointed for the pur- 
j)Ose of arranging technical matters connected with the transfer of 
the Tsingtao-Tsinanfu Eailway. or with the valuation of the per- 
manent improvements on. and additions to, the railway properties." ' 

Dr. Koo asked if it was wished to superpose that sentence in the 
notes to be exchanged. 

Baron Shidehara said that it was his intention to strike off the last 
sentence of paragraph 2 of his tentative plan and put it at the begin- 
ning of the exchanged notes. 

Dr. Koo said that he would accept it if it would be agreed that the 
word " all " should be substituted for the word " technical." 

Baron Shidehara pointed out that they were not going to revise 
the arrangement previously reached as to paragraph 2. 

Dr. Koo said that all matters to be taken up by the joint commis- 
sion would be technical, but that it was possible that difference might 
arise as to what were and what were not technical matters. Such 
question, for instance, as whether barracks and radio stations were 
railway properties or not might be considered technical or not. 

Baron Shidehara said that he did not see anj^ necessity for the 
suggested modification. Of course, it would be only technical matters 
that would come up before the joint commission. 

Dr. Koo said that, while it was true that questions which were not 
technical would not be taken up, difference of opinion might arise 
as to whether certain questions were technical or not. 

Baron Shidehara said that any matters larger than technical 
should, of course, be taken up by the two Governments. 



113 

Dr. Koo said that the nature and conditions of the transfer were to 
be determined largely by the two delegations right here, but the use 
of the word "technical" would cause unnecessary disputes within 
the commission itself. 

Baron Shidehara said that it was not their intention to organize a 
joint commission for any purpose larger than technical questions. 
The commission would not deal with political or administrative ques- 
tions. That was why it had been agreed that only an expert of a 
third power who had technical knowledge of those things should be 
consulted. Throughout the whole arrangement they had been talking 
of only matters of a technical nature. 

Dr. Koo denied he had had any political matters in his mind. He 
would then suggest the phrase " all matters of detail." 

Bkron Shidehara agreed. 

Dr. Koo then submitted the following: 

" Should the joint commission fail to reach an agreement on any 
question relating to the transfer of the Tsingtao-Tsinanfu Railway 

properties stipulated in the agreement of day, or on any 

matter connected with the valuation of the permanent improvements 
thereon or additions thereto as provided for in said agreement, such 
question or matter shall be taken up by the two Governments for dis- 
cussion and adjustment by means of diplomacy. In the determination 
of the points at issue, the two Govermnents shall, if necessary, obtain 
recommendations of an expert of a third power, who shall be desig- 
nated in advance in mutual agreement with each other. 

" Should the two Governments fail to reach an agreement, the said 
points at issue shall be referred to arbitration by expert or experts 
of a third joower or powers to be designated by mutual agreement be- 
tween the two Governments." 

Baron Shidehara, referring to the formula, said he objected to the 
phrase " in advance " in Dr. Koo's formula. He hoped that Dr. Koo 
would not stick to his idea in that respect. In making the provision 
they had only an extraordinary case in view. He was quite sure that 
the commissioners could agree on all matters of detail. 

Dr. Koo observed that when he said " in advance " he meant that an 
expert of a third power should be chosen before the two Governments 
took up the matter. 

Baron Shidehara said that he felt sure that if the two Governments 
took up any matter on which difference of views had occurred, they 
would be able easily to adjust it by compromise and there would be 
no need of calling in the assistance of an expert of a third power. 
That was why he said " if necessary." 

Dr. Koo consented. 

Baron Shidehara said that he did not see any meaning in the last 
paragraph of Dr. Koo's formula. In order to meet the Chinese desire, 
he had suggested his proposal, the meaning of which was that the 
Governments of Japan and China should decide any matter for 
themselves. His idea was not that an expert of a third power should 
decide anything. He would be asked only to aid with his recom- 
mendations. 

Dr. Koo said what if the tv\'o Governments could not agree ? 
Baron Shidehara said that although the recommendations of the 
expert of the third power would, of course, be respected, it was, as a 



114 

matter of iDrinciple, the two Governments that woukl decide upon any 
matter about which the joint commission could not agree. He thought 
that in practice the arrangement would work very satisfactorily, and 
that there would seldom occur the necessity of calling in the help of a 
neutral expert. 

Dr. Koo said that, not to prolong the discussion too much, he and 
his colleagues were disposed to agree to omit any reference to arbitra- 
tion if the Japanese delegation, for their part, would agree slightly 
to change the phrase '• an expert of a third power '' to '* an expert or 
experts of a third power or third powers." Inasmuch as some of the 
matters to be taken up would involve a great sum of money, the 
Chinese delegation desired to feel sure that there would be more than 
one expert. 

Baron Shidehara signified consent. 

Dr. Koo said that, with the understanding that the arguments of 
foreign experts should be respected, the Chinese delegation would 
consider this phase of the question as settled. 

QUESTION OF LOAN. 

Dr. Sze said that while the Chinese delegation considered it difficult 
to meet the Japanese views as i-egards the question of loan, he won- 
dered, however, if Baron Shidehara would be good enough to eluci- 
date his point first. 

Baron Shidehara thought that his meaning was sufficiently clear. 
He wondered if there were any point which he might make still 
clearer. 

Dr. Koo said that in order not to leave the position of the Chinese 
delegation undecided, they would propose to pay for the railway in 
cash. As for the mode of payment they would be pleased to discuss 
it with the Japanese delegation. The proposal of loan as formulated 
in the Japanese plan was not clear at all. If Baron Shidehara was 
prepared to elucidate various points of the proposal, he and his col- 
leagues would be glad to hear it. without being understood that their 
desire for cash payment was going to be relinquished. The question 
of loan was only of secondary importance from their standpoint. It 
would arise only when it was definitely ascertained that the necessary 
fund for the pa^^ment required could not be raised. 

Baron Shidehara said that while it might be a matter of secondary 
importance for China, it was with Japan one of the first importance. 
It was Japan's intention to retain in the railway a certain interest of 
the same nature and to the same extent as various foreign capitalists 
were actually allowed to have in regard to most of the Chinese rail- 
ways. 

Dr. Koo hoped that more light would be thrown on the point of 
Japan retaining an interest in the railway. He would appreciate if 
it could be made clearer why Japan should be particularly anxious to 
retain an interest in the railway. 

Baron Shidehara said that what he had meant by interest was only 
interest of the same nature as was granted to other, foreign capitalists 
in regard to Chinese railways. He did not know whether he had made 
himself clear, but his proposal was really a compromise plan. Perhaps 
he might succinctly recapitulate the position of Japan in regard to 
the Shantung question. At first Japan had believed, and still believed, 



115 

that she had a legal title to the Shantung Railway and its appur- 
tenant properties. China had concluded a treaty with Japan in 1915 
in which she recognized in advance whatever agreement Japan might 
make with Germany in regard to the question of Shantung, and China 
had expressed her satisfaction with that arrangement; but in order 
to meet China's point of view, Japan made in 1918 certain important 
concessions in regard to this question. She proposed the plan of joint 
enterprise. The plan was at that time accepted by the Chinese Gov- 
ernment. China again expressed her satisfaction with the plan of 
1918. As a further concession the Japanese delegation were now pro- 
posing that the railway properties should be handed over completely 
to China, Japan retaining only such interests in the railway as were 
in manj^ cases granted to other foreign nationals. If the plan of the 
loan agreement was now rejected by China, if she insisted upon the 
complete elimination of Japanese interest in the railway, the public 
in Japan would naturally ask what was the reason that Japan should 
be denied a treatment of equality with other foreign nationals, why 
Japan should be subjected to a discriminatory treatment. And there 
would naturally be created grave misgivings in the popular mind in 
Japan, He was afraid that that would be very deplorable for the 
future relations of the two countries. The Japanese delegates were 
already aware that they would be confronted with very grave diffi- 
culties in giving up the original plan of the joint enterprise. In the 
interests of a satisfactory and speedy solution of the question, they 
had taken upon themselves the whole responsibility in proposing this 
plan ad referendum. He hoped the Chinese delegates would take that 
into serious consideration. That proposition, which was really a plan 
of compromise, was designed to meet their mutual positions as far as 
possible. He hoped and desired that the Chinese delegates would not 
insist upon the complete elimination of Japanese interests from the 
railway. Briefly, that was the position of Japan at present. 

Dr. Sze said that he fully appreciated the difficulty of the Japanese 
delegates in meeting the Chinese point of view in this question of the 
railway. If the Japanese delegates entertained any anxiety at all as 
to the interests of the merchants using the railway, then he would 
like to be informed on that point. The Chinese Government would 
see that all facilities were afforded the Japanese merchants. When 
the Chinese delegation had proposed a cash payment for the railway 
they had no idea of discriminating against the Japanese interests. 
The idea of cash payment had come to the mind of the Chinese dele- 
gates only recently because they had received an offer from the Chi- 
nese bankers. At present, however, China might be, or might not be, 
able to make a cash payment. That was still an open question. If the 
Japanese delegates felt any anxiety as to the use of the railway, the 
Chinese delegates would do their best to meet the Japanese wishes by 
Avay of safeguarding the interest of the Japanese. The only difficulty 
with which they were confronted was that they might be criticized 
at home in that while they could use their own money, they were 
forced to use other persons' money. The Chinese delegates had no 
intention of discriminating against anybody. 

Baron Shidehara said that it was not exactly what he had in mind. 
The purpose of the Japanese proposition was to have a certain interest 
in the railway and not merely to protect and safeguard the commercial 
interests of Japan, It was principally for the purpose of meeting 



116 

criticism which Avoiild be made in Japan. As a matter of history, 
the Japanese j)roposal was really a great compromise. Japan had 
made concessions three times. At first Japan had conceded the point 
in regard to the whole proj)erty rights of the railway. She had had a 
clear title to the Shantung Railway and its appurtenant properties, 
but she had proposed a plan of joint enterprise with China which 
meant that China should haA^e half interest and half share in the 
railway properties. Now, she was again proposing a new plan by 
which to restore the whole property rights completely to China. It 
might not be out of place for him to point out that China still had 
a large amount of railway loans, for some of which she had great 
difficulty in paying the interest, not to mention the principal. In the 
face of that situation, China proposed to buy the Shantung Railway 
outright. Very naturally, the Japanese peoj)le would ask why Japan 
should be excluded from having an interest in the Shantung Railway 
while China still had considerable amount of loans of which both 
principal and interest remained unpaid. If China insisted upon the 
purchase of this railway, it would be difficult for the Japanese people 
to escape the conclusion that China did not like Japan to have any 
interest in it. The Japanese delegation fully realized the position of 
their Chinese colleagues, but at the same time the}^ hoped that their 
own position would also be apj)reciated. The original instructions 
they had were to stick to the plan of joint enterprise. Even in regard 
to the tentative plan proposed by them there would be difficulty in 
persuading the Japanese people. If the Chinese delegates insisted 
upon eliminating Japanese interest in the Shantung Railway, he was 
afraid that very serious misgivings might be created in the Japanese 
mind. This question of loan, therefore, was the point upon which he 
and his colleagues placed the greatest importance. Should it not be 
accepted, he did not know if there might be any other plan which 
they could accept and justify themselves before the public opinion 
of Japan. He hoped that the spirit of compromise in which the tenta- 
tive plan had been proposed by the Japanese delegation would be 
appreciated and that they would be met halfwa3^ The Chinese dele- 
gation had been met more than halfway. In fact, Japan had been 
making concessions successively. 

Dr. Koo said that far from the Chinese delegation entertaining- 
even the semblance of a discriminatory treatment for the Japanese, 
they had proposed to pay in cash reallj^ out of their desire to cement 
the relations between the two peoples. As the Japanese delegation 
were doubtless aware, this whole Shantung question had exercised 
the minds of the two peoples to such an extent that it was thought 
desirable to remove, once for all, this cause of prolonged misunder- 
standing. Therefore, in making the proposal, the Chinese delegation 
had in view the larger interests of both Japan and China. Thej- 
simply desired to promote better neighborly relations with Japan. 
He hoped that the Chinese position would not be viewed as in any 
way aiming at discrimination either against Japan or her people. 

Baron Shidehara said that the fact remained that China had not 
eliminated the interests of foreign nationals with regard to many 
of her railways, while she now proposed entirely'' to exclude Japanese 
interests from the Shantung Railway. The Japanese people would 
very naturally come to the conclusion that there was, in fact, dis- 



117 

crimination against them, and they would, naturally wonder what 
was the real meaning of this practical discrimination against them. 
There was no denying the broad fact that only Japanese interests 
were going to be eliminated, while other railways in which foreign 
nationals were interested had not been even touched. 

Dr. Sze said that this idea of buying out foreign interests was 
not confined to the Shantung Railway. In point of fact, the Belgian 
interests in the Peking-Hankow Railway had been paid back. Thus 
the proposal in regard to the Shantung Railway was not the first 
instance of this kind in the railway history of China. 

Baron Shidehara said that the very special circumstances which 
attached to the Shantung Railway — the history of the question — 
should be taken into consideration. He did not, but the public might, 
doubt why China in the present situation should propose to buy 
outright the railway property. It would be difficult for him to ex- 
j)lain why China should do so, while at the same time a large amount 
of debt was still in arrears, even in regard to various loans supplied 
by Japanese financiers who had great difficulty in getting payment 
for not only the principal but the interest. It was inevitable that 
the public opinion in Japan would strongly doubt the motive of 
China's action. 

Dr. Sze said that this idea of cash payment only had come to the 
Chinese delegation when offers had been made by Chinese bankers. 
They would naturally complain if Japanese financiers, instead of 
native bankers, should be asked to advance the money ne^eded. It 
was true that China was already heavily in arrears in regard to 
foreign loans. He thought it was all the more reason why no more 
railroad loans should be contracted with foreign financiers. It was 
understood that this Shantung Railway was very profitable. The 
Chinese bankers would naturally be desirous to participate in the 
profit, and it was difficult for the Chinese Government to refuse this 
very legitimate desire of their nationals. The Chinese delegation 
at the same time appreciated the public sentiment in Japan, so they 
would propose a comj^romise. They could not agree to the Japanese 
proposition concerning loans, but, on the other hand, they should 
be glad to do their utmost to remove any cause for misgivings that 
might exist on the score of the Japanese trade in Shantung. 

Baron Shidehara said that the Japanese people would Avonder 
what could be the motive of the Chinese merchants to buy the Shan- 
tung Railway outright without leaving any interest for the Japanese. 
It would be said that it was because of their desire to drive away 
the Japanese from the railway. 

Dr. Sze said that with bankers of all countries the question of in- 
terest was the most important consideration. The Chinese bankers 
knew the Shantung Railway to be a profitable concern. They saw 
it mentioned in a recent issue of the China press that the railway 
had made 16,000,000 yen last year. That was the underlying motive 
of the offers of the Chinese bankers. 

Dr. Koo said that, speaking from the broader point of view of the 
good neighborhood betAveen the two countries, he would consider it 
very wise to settle once for all this question of reparation for the 
Shantung Railway, so that the one cause of the unfortunate feeling 
between the two peoples might be dissipated. He hoped that if the 
whole question were viewed in that light, the Chinese proposal would 



118 

not only meet with the approval of the Japanese Government but 
eventually with that of her people as well. 

Baron Shidehara said that, in his opinion, the misunderstanding 
between the two peoples would be increased instead of being dissi- 
pated by the suggested arrangement. He thought he had made the 
Japanese position sufficiently clear. If there could be no agreement 
in regard to paragraph 3 of his tentative plan, it would be impossi- 
ble for him and his colleagues to take the whole responsibility in 
making to the Japanese Government a recommendation contrary to 
their explicit instructions. He hoped that his Chinese friends would 
reconsider their position. The Japanese delegation placed the ut- 
most importance upon the point at issue. Much as they regretted it, 
they would not be able to agree to the plan of purchase. 

Dr. Koo said that he would like his Japanese friends to help the 
Chinese delegation so that they might not be placed in a position 
vis-a-vis their people at home of being obliged to take a loan which 
was not wished by the Chinese people, but Avhich they felt they might 
be able to furnish themselves. While realizing the position of the 
Japanese delegation, he at the same time would ask them to consider 
the difficulty of the Chinese delegation as well. The proper thing to 
be done in this situation was, to his mind, to try to work out some 
plan which would relieve the Japanese delegates of their difficulty 
without placing the Chinese delegates in a trying position. 

Baron Shidehara hoped that it would be realized that he and his 
colleagues had sincerely done their very best. If even this modest 
plan should not be agreeable to the Chinese delegation, he did not 
know^ what could be done with the whole question. 

The press communique was issued in the annexed form (x\nnex I), 
and the meeting adjourned at 6 p. m. until 2.30 p. m. to-morrow. 

Washington, D. C, December 15^ 1921. 



SJC-13.1 

Annex I. 



December 15, 1921. 



[For the press.] 

Issued hy ths Chinese and Jayanese delegations. 

Further progress was made in the thirteenth meeting of the Chi- 
nese and Japanese delegates relative to the question of Shantung in 
their discussion about the Tsingtao-Tsinanfu Railway. The meeting 
was adjourned at 6 p. m. until 2.30 to-morrow afternoon. 



FOTJRTEENTH MEETING. 



Fourteenth meeting, held in governing board room, the Pan 
American Building, Washington, D. C., at 2.30 o'clock in the after- 
noon of Friday, 16, 1921. 



PRESENT. 



China. — Dr. Sao-Ke Alfred Sze, Dr. Y. K. Wellington Koo, Dr. 
Chung Hui Wang. Secretaries : Mr. T. C. Yen, Mr. Tsai, Mr. 



119 

Tung-Fan Hsu, Mr. C. H. Zee, Mr. Telly Howard Koo, Mr. Chuan 
Chao. 

Japan. — Baron K. Shidehara, Mr. M. Hanihara, Mr. K. Debuchi. 
Secretaries: Mr. S. Saburi, Mr. E. Kimura, Mr. H. Saito, Mr. T. 
Shiratori. 

Also present as observers : 

The United States of America. — Mr. John Van A. MacMurray, 
Mr. Edward Bell. 

The British Empire. — The Right Hon. Sir John Jordan, G. C. I. E., 
K. C. B., G. C. M. G. ; Mr. M. W. Lampson, M. V. O. 

THE QUESTION OF THE RAILWAY LOAN. 

Dr. Koo said that the stage had been reached at the end of yes- 
terday's discussion where, on one hand, the Chinese delegation, in 
view of the special difficulties confronting them, urged that the pay- 
ment for the Tsingtao-Tsinanfu Railway properties should be made 
in cash, and on the other the Japanese delegation on their part made 
it equally clear that on account of the difficulties confronting them, 
the best method of payment for the railway properties would be 
through concluding loan contracts with Japanese capitalists. He 
and his colleagues took this matter into very careful consideration. 
While they saw a great deal of difficulty in finding some way out of 
the difficulties on both sides, they were happy to say that they had 
found an arrangement which he hoped might be acceptable to the 
Japanese delegates. The underlying idea of that proposal was to 
meet the wishes of the Japanese delegation in substance without al- 
together overlooking the position hitherto taken by the Chinese dele- 
gation. In substance, the proposal was that China would pay for 
the railway not^n one cash installment, but in six installments, ex- 
tending for three years, at intervals of six months each. Only at 
the end of three years from the transfer the railway would be en- 
tirely redeemed. The first installment would be paid in cash. For 
the remaining five installments, the Chinese delegates proposed that 
the Chinese Government should deliver to Japan the amount in 
treasury notes seciired on the revenue of the Tsingtao-Tsinanfu 
Railway. Pending their maturity it w^as proposed that interest at 
a reasonable rate should be paid. After the first payment, the five 
remaining installments would be paid every six months. In order 
to give evidence to the earnestness of the Chinese delegates to pre- 
clude any possible ground of anxiety on the part of the Japanese 
merchants, as had been stated by Dr. Sze the previous day, China 
would, in the operation of the said railway, pledge herself not to 
practice any discrimination against the traders of any' foreig*n 
nationals. That was the gist of the new plan of the Chinese dele- 
gation which they submitted for the consideration of their Japanese 
friends. He hoped that it would be found acceptable, in considera- 
tion of the spirit in which it had been formulated. 

Baron Shidehara asked for a copy of the Chinese proposal. 

Copies of the Chinese proposal were distributed (Annex I). 

Baron Shidehara said that upon just a brief examination of the 
new Chinese proposal, he found that it did not differ much from 
what had been proposed at the previous meeting. That was simply 
;a proposition of extending the payment for three years. That would 



120 

prove more favorable to China than an immediate payment in cash. 
He feared that the Japanese point of view in regard to the question 
had not been made entirely clear to his Chinese friends. It must be 
pointed out that when Japan had projDosed the plan of joint enter- 
prise, she had receded haWway from her original plan of full owner- 
ship and operation by Japan of the railway which she had believed 
she was legally entitled to under the terms of an express treaty 
provision. When, lastly, the Japanese delegates had proposed on 
their own responsibility a plan of the railway loan agreement in 
lieu of a plan of joint enterprise, they had committed themselves to 
the complete abandonment of their original plan. The proposal that 
Japan should retain a certain interest of the same nature and to the 
same extent as other foreign nationals were permitted to hold in 
other railways in China did not interfere with the full ownership 
or the full operation of the railway by China. She was to acquire 
the full control, the full ownershijD, and the full operation of the 
railway, and Japan simply wanted to reserve to herself a certain 
interest of such description as was practicall}^ of common applica- 
tion to all or most of the railways in China. 

Now. it appeared that China desired to make the last proposal of 
Japan a fresh starting point for a mutual compromise arrangement, 
whereas, for the Japanese part, the last proposal was, in fact, a com- 
plete surrender of the original plan of joint enterprise. It was now 
desired of the Japanese delegates that they should once more meet 
the Chinese point of view ; should concede halfway starting from the 
last proposal they had made. In entire frankness, he would like to 
say that such assertion on the part of the Chinese was hardly fair 
or just to the Japanese delegation. In order to reach a full under- 
standing of this question, it might be useful to explain the Japanese 
plan in a more concrete form. He should be perfectly frank in his 
explanation, and he iriisted that his frank expression of views in 
regard to the quest! n would not be misunderstood. He had been 
informed by men who had closely surveyed the situation of the 
Chinese railway that there were three distinct features in Chinese 
railways which struck foreign observers. In the first place, Chinese 
railway administration did not undertake any responsibility for the 
loss of goods intrusted to its care. Consignors of goods, not being 
able to rely upon the railway oiRcials. usually sent their own hired 
men to freight cars to take care of their own goods. In the second 
place, the distribution of freight cars and of space in freight cars 
for the consignors of goods was made in a very arbitrary way, and 
was very easily influenced by corruption. In the third place, the 
military' authorities and the individual soldiers very frequently inter- 
fered with the proper management and working of the railways, 
without any regard whatever to the interests of the public and to 
the nature of the service to be afforded by these organs of public 
utilit}^ In the circumstances, the practice had gradually grown up 
for foreign nationals interested in Chinese railways to ask China to 
engage and employ siich_chief engineers, traffic managers, and chief 
accountants as they r^iommended. What Japan would like to ask 
now was nothing more than what was generally accorded to foreign 
capitalists. The Japanese delegates would like to propose, in the 
same way as was the case with other Chinese railways, that those 
officials— chief engineers, traffic managers, and chief accountants — 



121 

should be engaged and employed by China in the Shantung Railway 
on the recommendation of the Japanese capitalists. It was under- 
stood that those officials would, of course, be subjected to the super- 
vision of the Chinese higher railway authorities. It was proposed 
that China should obtain full ownership, control, and operation 
of the railway, and that those officials whom Japanese capitalists 
might recommend should be placed under Chinese supervision and 
control. This plan, he was quite sure, would not interfere in any 
way with the Chinese control, administration, and operation of the 
railwa3^ nor with the plan of the unification of the Chinese railways 
which he understood China had now in view. He felt that the 
Japanese proposition was entirely fair and just to both, sides. The 
proposal the Chinese delegation now submitted was so different from 
what the Japanese delegates had in mind, and he regretted that he 
hardly found his way clear to accept it. 

Dr. Koo, addressing Baron Shidehara, said that after listening 
to his interesting and frank observations it might perhaps be use- 
ful if he should try to elucidate further the Chinese point of view 
with reference to some of the points which Baron Shidehara had 
raised and to make it as clear as possible. He should perhaps follow 
the order adopted by Baron Shidehara. In the first place, with regard 
to the legal status of the railway, it was hardly necessary for him 
to go into a detailed discussion as to the views he and his colleagues 
entertained. It would suffice to say that the very fact that the two 
delegations were engaged in these conversations with a view to set- 
tling the questions of Shantung would seem to show that the status 
of the railways was to say the least, more or less uncertain. The 
question was more theoretical than practical, at least for the im- 
mediate purpose both the delegations had in view. So he would 
pass on to the new Chinese proposal. Judging from the observa- 
tions Baron Shidehara had made, he feared that the spirit which 
had animated the Chinese delegates in making their new proposals 
had not been fully appreciated. They could well understand the 
Japanese desire to retain a financial interest in the Shantung Rail- 
way properties. It was in order to meet that desire as far as pos- 
sible, without at the same time overlooking their own position, that 
the Chinese delegation offered the new proposals. If they had not 
been able thus far to find it possible to propose any plan which 
would admit of the retention by Japan of a larger share in the Shan- 
tung_ Railway, he hoped it would not be viewed as if they had been 
looking to discriminate against the Japanese. As a matter of fact, 
no foreign power possessed greater or more important railway in- 
terests to-day in China than Japan, if the South Manchuria Rail- 
way was taken into consideration. 

In the second place, Avith reference to the observations Baron 
Shidehara was good enough to make concerning the administration 
of the present Chinese railways, he would say that, of course, the 
three points mentioned by him appear to him and his colleagues 
rather severe strictures. He, for one, felt that these were hardly 
deserved. He had just been informed by one of the experts of the 
Chinese delegation that the practice of holding shippers responsible 
for the goods consigned had been done away with, the railway ad- 
ministration having some time ago promulgated regulations plac- 
ing responsibility upon the railway for freight transportation. 



122 

AVith regard to distribution of cars and tlie granting of space to 
various shippers, his infonnation and impression were that there 
hacl been ver^^ little criticism on that point. On the contrary, the 
Chinese railway administration had from time to time been com- 
plimented on the fact that cars Avere being utilized to the utmost, and 
moreover by a new regulation shippers were not allowed to keep cars 
indefinitely — not more than 24 hours. If there had in fact been un- 
satisfactory service it must have been due, more than to any other 
cause, to the fact that at present there was a shortage of Avagons and 
cars on account of the transportation of soldiers, etc. The general 
point which he desired to make clear Avas this, that all the observa- 
tions made by Baron Shidehara had been made in reference to 
Chinese raihvays in general. Most of these railways Avere being 
administered Avith the assistance of foreign chief engineers, traffic 
managers and chief accountants. If the observations Avere founded 
on facts, it might be difficult to say Avhat share of the responsibility 
Avould fall upon the shoulders of these foreign officials. He did not, 
hoAvever, Avish to labor that point too much. 

The practice of employing foreign experts had groAvn up, not from 
any dissatisfaction on the part of foreign financiers but from the fact 
that in building raihvaA'S China had had to borroAv foreign capital 
I and that, in making railway-loan contracts, foreign bankers had 
j used the opportunity to ask for these various offices. But in the case 
1 of the Shantung Railway loan, the road was already in operation. 
/ It eA'idently stood in a different class from the railways Avhich Avere 
I merely projected and for which the necessarj^ fund for construction 
had to be financed. Besides, as regards the operation of the Shan- 
tung RaihvaAN though he Avas not in a position to make any definite 
statement, he believed that the Chinese Government meant to utilize 
such foreign expert assistance as might be found already in operation, 
for no one desired the efficiency of the Shantung Raihvay service 
more earnestly than China herself. He Avould, therefore, urge his 
colleagues from Japan not to misconstrue the motiA^es underlying the 
neAv proposal of the Chinese delegation. They had made an honest 
effort in order to meet the wishes of the Japanese delegation in regard 
to this aspect of the raihvay question, in the discussion of which they 
had already been engaged for a few daj^s. He had just been reminded 
bA' one of his colleagues of the efficiency of the Chinese in book- 
keeping. A notable instance was that one of the railways con- 
trolled by Japanese capitalists in South Manchuria — a branch of the 
South Manchuria Eailway — had been put in order through the 
assistance giA-en by the Chinese GoA^ernment. • 

Baron Shidehara said that the observations he had made upon the 
actual conditions of the Chinese railways referred principally to 
those railwaA^s which were exclusively under Chinese administra- 
tion, and the experts who had told him of the situation were men 
verj^ well acquainted with the actual state of affairs in China. These 
were matters of opinion, but Avhat he desired principally to call to 
the attention of his Chinese friends Avas this, that he could not well 
understand why this new Chinese proposal was considered different 
from the plan they had offered the day before. This plan Avould, in 
fact, give China a better position than the plan of payment in cash, 
for under this plan the payment was simply to be deferred three 
years. Japan would not be allowed to retain any interest whatever 



123 

in the railway ; simply the payment was to be secured upon the reve- 
nue of the railway properties, but the last installment would be due 
on the expiration of three years after this agreement came into effect. 
He did not see how that could be a compromise at all between the 
Japanese and the Chinese proposal. He would appreciate it if Dr. 
Koo could make the new plan a little clearer; if he could explain the 
difference between this proposal and the cash payment. 

Dr. Koo said that the obvious difference lay in the period of three 
years. The Chinese delegation had understood from Baron Shide- 
hara's observations the day before that the Japanese delegation de- 
^ sired to satisfy Japanese public opinion by retaining financial in- 
terest in the Shantung Railway. It was to meet that wish that the 
Chinese delegation now proposed to prolong the payment by dividing 
it into six installments. By that arrangement Japan would have 
three years during which she would enjoy a considerable interest in 
the railway. 

Baron Shidehara asked what he meant hj considerable interest. 

Dr. Koo said that after the first installment had been paid Japan 
would still have five-sixths interest in the railway. He wondered if 
that looked an insignificant interest to Baron Shidehara. 

Baron Shidehara said that he did not see any compromise on the 
part of China. The postponement of payment was in China's inter- 
est and not in Japan's. The fact that the payment would be secured 
on the revenue of this railway seemed hardly to meet the desire he 
had expressed. 

Dr. Koo said that Baron Shidehara would not. perhaps, overlook 
the fact that the securing of the payment on the revenue of the rail- 
way, if onlj' for three years, would greatly contribute to the interest 
of Japan in regard to the railway. 

Baron Shidehara said he hardly could admit that. 

Dr. Koo asked if it was meant that cash payment was preferable,' 
when Baron Shidehara said that the new proposal would be less 
favorable to Japan because it gave more time to China in which to 
get the mone}^ for the pajanent. 

Baron Shidehara said that this new proposal comprised no con- 
cession on China's part, while on Japan's part it comprised complete 
surrender to the Chinese point. 

Dr. Koo said that in the original proposal of the Japanese delega- 
tion they desired China to take loans from Japanese financiers. All 
loans had to be terminated sooner or later. The fact that all the 
unpaid portions of China's payment should be secured under this 
new plan upon the revenue of the Shantung Railway would give 
every possible interest to Japan in the railway. 

Baron Shidehara observed that as he looked at a list of railway i 
loans of China he noticed that most of them had a period ranging 
from 40 to 50 j-ears. He did not find a single loan the term of which ' 
was only three years. 

Dr. Koo remarked that, as he had said a little while ago, all of 
China's railway loans had been contracted for lines merely projected j 
and none for lines already constructed. The Tsingtao-Tsinan Rail- j 
way stood in a different class from other railways now in operation, j 
He' felt sure that Baron Shidehara would not fail to see the differ- i 
ence. 



124 

Baron Shidehara desired that Dr. Koo would be good enough to 
explain what difference there was in fact between the Shantung 
Railway and the other Chinese railways now in operation. 

Dr. Koo said that Baron Shidehara had referred to other railway 
loans, and so he had answered that all railway loans were made not 
for buying lines already constructed, but for lines which were 
projected and for which the necessary fund could not be obtained 
locally. 

Dr. Sze said, to cite a few instances, China had purchased the 
Peking-Hankow Railway and also the Canton-Hankow Railway. 

Baron Shidehara said that there was one point on which his obser- 
vation the day before seemed to have been misunderstood. In the 
new proposal of the Chinese delegation it was said that the Chinese 
Government would give assurance that there would be no discrimina- 
tion against the interests of Japanese traders, but that was not the 
kind of discrimination he had in mind. What he meant was dis- 
crimination against Japanese capital. 

Dr. Koo said that he saw Baron Shidehara's point. He thought 
the last point of the Chinese proposal needed no mention in view of 
the principle of equal opportunitj^ for the commerce and industry of 
all nations in China, so he would drop that point. 

Baron Shidehara reminded Dr. Koo that according to the first 
Chinese proposal it would seem that Japanese capital was to be 
excluded. 

Dr. Koo said that that would not necessarily follow. When the 
Chinese delegation had proposed cash payment they had had in mind 
merel}^ the desire to raise the money locally so the charge of dis- 
crimination would not occur until it was made known that China 
desired to secure funds in foreign countries other than Japan. 

Baron Shidehara said that, as he had explained several times, 
Japan's public opinion would certainly look with misgiving upon any 
plan which excluded Japanese interest from the Shantung Railway, 
while, in regard to many other railways, China actually permitted 
foreign capitalists to hold similar interest, and while a large amount 
of loans provided by Japanese capitalists were still in arrears. 

Dr. Koo said that as his colleague, Dr. Sze, had observed, the 
money China proposed to pay to Japan was to come from Chinese 
bankers ; they had told the Chinese Government that they were in a 
jDOsition to finance this railway property in Shantung. As regards 
loans on which interest payment had not yet been made, the matter 
was entirely different. He had no accurate knowledge of the matter, 
but personally he thought the reason Avhy the Chinese bankers did not 
offer financial assistance to their Government to pay the outstanding 
loans was, perhaps, because of the circumstances under which these 
loans had been negotiated. 

Baron Shidehara said that the terms Japan had offered in regard 
to the whole Shantung question were quite generous and liberal, even 
taking only the financial phase of the question into consideration. 
For instance, the Japanese delegation had offered to hand over the 
docks, wharves, warehouses, etc., without any charge whatever. Ac- 
cording to the customs report made by the former customs commis- 
sioner at Tsingtao, the estimated value of those docks and warehouses 
amounted to 50,000,000 gold marks, and they were now to be offered 
to China without any charge! 



125 

Dr. Sze said that he understood improvements upon these proper- 
ties were to be paid for ; that it was only those wliich the Germans 
had surrendered to Japan that Japan proposed to hand over to China 
without charge. 

Baron Shidehara reminded Dr. Sze that German property was not 
Chinese property. He said he had simply pointed out that China 
was going to derive considerable benefit from the terms of the ar- 
rangement offered by Japan. In any case, he didn't think it neces- 
sary to go much further in discussing the terms the Chinese delega- 
tion had proposed. They were so different from what the Japanese 
delegation had proposed. He regretted to say that they were hardly 
acceptable to him and his colleagues. 

Dr. Koo inquired in what respect they were unacceptable. 

Baron Shidehara said that the Chinese proposal was unacceptable 
practically in all respects. There was no concession on China's part, 
while there would be a complete surrender on Japan's part. 

Dr. Koo said that what the Chinese delegation had understood 
their Japanese colleagues to attach the greatest importance to was 
financial interest 

Baron Shidehara interrupted Dr. Koo by saying, " financial in- 
terest of the same nature and to the same extent as other foreign 
capitalists had in most of the Chinese railways.'' 

Dr. Koo said that in view of the great importance the Japanese 
delegation had attached to financial interest, the Chinese delegation, 
out of the spirit of compromise, had proposed to create a period of 
three years. It was not, in his opinion, an inconsiderable interest. Al- 
though limited to three years, he hoped it would not be construed 
as denying Japanese interest in railways in China in general. As 
he looked at the table of outstanding railway loans of China in 1920, 
Japan's amount was yen 21,600,000, the second largest in the table. 

Baron Shidehara said that the proposal for securing the payment 
on the railway revenue for three years, if it was interest at all, was 
not the sort of interest which the Japanese delegates had in mind. 
That was entirely different from that which China had already given 
to foreign nationals. 

Dr. Koo said that railway revenues had been offered as security 
for various foreign railway loans. For instance, the surplus revenue 
of the Peking-Mukden Railway was assigned for the security of the 
Shanghai-Hangchow-Ningpo Railway. He was glad that Sir John 
Jordan had borne testimony to the fact that the financiers concerned 
in that loan were very much satisfied. 

Dr. Sze said that the revenue of the Peking-Mukden Railway had 
also been assigned as security for Shanghai-Pukow Railway. 

Baron Shidehara feared that perhaps he had not made himself 
clear. He wanted to say that if what Dr. Koo pointed out was any 
interest at all. that was exceedingly less than what China had already 
given to foreign nationals. 

Dr. Koo said that Baron Shidehara seemed to think very little 
of the interest he (Dr. Koo) had pointed out, thouirh that involved 
millions of gold marks. He inquired in what way Baron Shidehara 
desired to have the Japanese interest augmented. 

93042—22 9 



126 

Baron Shidehara replied that if Japan had accepted cash pay- 
ment it woidd have been better — the postponement of payment would 
not be of any value to Japan. 

Dr. Koo wondered whether Baron Shidehara thought that the 
period was too short. 

Baron Shidehara stated that was not the only point. As he said a 
few moments ago, the Chinese delegates seemed to refuse some of the 
conditions proposed, namely, the engagement by China of a traffic 
manager, a chief engineer, and a chief accountant from Japan. 

Dr. Koo said that in order to maintain the highest efficiency in the 
operation, it w^ould perhaps be natural for the Chinese Government 
to enlist foreign expert assistance. The proposed arrangement did 
not necessarily preclude the Chinese Government from enlisting such 
foreign assistance as might be desirable in the operation of the rail- 
way. Did he understand that Japan would like, in order to increase 
her interest, to have a chief engineer 

Baron Shidehara interA^ened and said, a chief engineer, a traffic 
manager, and a chief accountant. He wondered whether Dr. Koo: 
had said that his proposition was not intended to preclude the en- 
gagement of a Japanese engineer, traffic manager, and chief ac- 
countant in the service of the railway. 

Dr. Koo stated that what he had said was that it did not necessarilj 
preclude the employment by the Chinese Government of any foreign 
nationals. In order to secure efficient operation of the railway, it 
might be desirable for the Government to utilize such foreign expert 
assistance as was available. 

Baron Shidehara supposed that the Chinese delegates could not 
go so far as to say that they had no objection to engaging Japanese- 
experts. 

Dr. Koo said that, if it was found necessary, the Chinese Gov- 
ernment would naturally utilize such foreign assistance as was al- 
ready done in connection with various Chinese railways. 

Baron Shidehara supposed, however, that the Chinese delegates 
could not commit themselves definitely to that arrangement. He well 
understood that the present arrangement did not preclude the Chinese 
Government from engaging some foreign expert .assistance, but he 
would like to ask if there was any objection on the part of the Chinese 
delegation to making such an arrangement. 

Dr. Koo, after a' few moments' consultation with his colleagues, 
asked Baron Shidehara what was the point of his question, which he 
had failed exactly to understand. 

Baron Shidehara said that his point was whether the Chinese dele- 
gation had an}^ objection to arranging with the Japanese delegation 
to engage the chief engineer, traffic manager, and chief accountant 
whom Japanese capitalists would recommend, in the Shantung Rail- 
way administration, of course, 6n the understanding that they would 
be under the supervision and control of the higher Chinese railway 
I authorities. 

Dr. Koo said that before he considered how to answer the ques- 
tion he would like to ask Baron Shidehara to elucidate the point, a 
little further. He wondered whether it was in the mind of Baron 
Shidehara that that arrangement should have reference only to the 
period during which the payment for the railway properties had not 
been completed. 



127 

Baron Shidehara said that of course the arrangement had been } 
proposed in that sense, but he had not agreed to the period of three ' 
years. He preferred a longer time. 

Dr. Koo said perhaps it would be easier for the two delegations 
if they could reverse the order of discussion. If the Japanese dele- / 
gates accepted three years, then the Chinese delegation would be j 
ready to consider the other question, thougli they could not as yet | 
quite commit themselves on that point. 

Baron Shidehara said that he would propose to have the period 
fixed on the basis of the terms generally accepted in relation to rail- 
way loans with various foreign capitalists. 

Dr. Koo said he desired to be pardoned for his repetition and re- 
dundance in pointing out the difference between this and other lines. 
The periods of loans for other lines, it was true, were much longer 
than three years. That was, hoAvever, due to the fact that the lines 
were much longer, the amount of loans much larger, and the con- 
struction took longer time. The construction of the Peking-Hangkow 
Railwaj^, for instance, had taken nearly 10 j^ears. His colleague had 
just passed him information that another reason for the longer terms 
was that it was difficult to ascertain for the people how soon the rail- 
way would be able to have sufficient traffic to get revenue to meet the 
loan services. 

Baron Shidehara said tliat he understood that when the railway 
was under the German regime, there was no fixed time for the re- 
purchase of the railway. 

Dr. Koo said that that was true, but there was an agreement to the 
effect that the Chinese Government could, at any time, negotiate as to 
the purchase of the raihvay. 

Baron Shidehara said that the Chinese, nevertheless, had not initi- 
ated such negotiations. 

Dr. Koo said that they had not in the past. 

Baron Shidehara said that was the point. China had been at lib- 
erty to start negotiations with Germany any time, but the Germans 
might very well have said that thej would like to have the railway 
for 40, 50, or 99 years. Since there had been no previous agreement 
made in that regard, China would not have had the right to purchase 
back the railway from Germany. 

Dr. Koo said, of course, it was not at all improbable that the Shan- 
tung Eailway properties, after being taken over b}^ China, might be 
operated jointly with the Tientsin-Pukow line in order to minimize 
the cost of operation. If that course were to be pursued, foreign en- 
gineefs of that line might be asked to take care of this line in Shan- 
tung also. Of course, if the Japanese delegates had in mind some one 
from Japan, that was another matter. 

The two delegations were really anxious to make progress in the 
discussion. If Japan could accept the period, then they might con- 
sider other points to which Baron Shidehara attached so much 
importance. 

Baron Shidehara said that he did not mean to be unreasonable, 
but the period of three years was so short that he could hardly con- 
sider it. 

Dr. Koo said that in fixing the period of the loan, he would ask 
the Japanese delegates to take into consideration the state of public 
opinion in China. The Chinese delegates had really tried to find 
a. way out of their present difficult position. 



128 

Baron Shidehara said that in that point the Japanese delegates 
were in the same difficulties. He hoped that the Chinese delegates 
would be able to act with detennination. If the two delegations 
were to follow public opinion too strictly, they would not iDe able 
to reach a solution satisfactory to both sides. As he had said before, 
the list of the more recent Chinese railway loans indicated that from 
40 to 45 years was their common term. 

Dr. Koo wondered whether Baron Shidehara did not choose the 
longest ones. 

Baron Shidehara said that he had been alluding to loans concluded 
since 1913. The Pukow-Sinyang Railway had a term of 40 years; 
the Yamchou-Chunking Railway, 50 years; the Nanking-Hunan 
Railway, 45 years, and the Shansi-Hunan Railway, 40 years. 

Dr. Koo said that all those were building lines. They had merely 
been projected and the construction had not been completed. 

Baron Shidehara said that he did not mean to insist upon obtain- 
ing the same terms in regard to the Shantung Railway as those re- 
garding other railways. He was not asking for anything unreason- 
able, but the term of three years was so short, so different from what 
the Japanese delegates had had in mind, and they could hardly give 
consideration to the present Chinese proposal. 

Dr. Sze said that the Shantung Railway had already been com- 
pleted; therefore, he did not think that a period of three years was 
so ver}' short. In the case of the Tientsin-Pukow Railway, there was 
a provision as to repurchase, but 10 years were spent in its con- 
struction. 

Dr. Koo said that, in determining the period, the fact should be 
taken into consideration that the Shantung Railway had been com- 
pleted and had always remained out of China's hands. Three years 
from now, that was, in 1924. it would have been 22 years from tlie 
time when the concession was made, and 17 years from the time of 
its construction. Three years, therefore, should be a reasonable 
period. 

Baron Shidehara said that, at the same time, it must be pointed out 
that the Japanese delegates had made such considerable concessions 
successively and receded from their original position to meet the 
Chinese wishes. If the period which had elapsed since the Sino- 
German agreement in 1899, namely, 22 years, was deducted from the 
average period of the more recent foreign railway loans standing 
at 45 years, there would remain 22 or 23 years. 

Dr. Koo said he was sure Baron Shidehara did not consider that 
a reasonable period. 

Baron Shidehara said that he had been speaking of loans con- 
tracted since 1913 and he found that the average period was about 
45 years. 

Dr. Wang said that, according to his computation, the average 
term, taking 17 different railway loans, would appear to be 33 years. 

Baron Shidehara asked what loans he counted. 

Dr. Wang handed to Baron Shidehara a list of the loans (An- 
nex II). 

Dr. Koo said that he did not wish to hurry Baron Shidehara, but 
while the figures might be desirable, the average would not be of so 
much help. The various contracts had different features; they dif- 
fered not only in themselves, but also according to the districts 



129 

traversed by the lines. For instance, a loan was floated in 1914 for 
the construction of the Nanking-Hunan Railway. AVhile the term 
was fixed for 40 years, the period of repurchase was fixed at 15 
years after the loan contract was concluded. In the present case 
construction was completed in 1905 ; therefore, 16 years had already 
elapsed. If 3 jeavs were added, it would already be 19 years. 
Three years was not unreasonable, even from the point of view of 
the existing railway contracts. 

Baron Shidehara said that as regards the Shantung Railway the 
German Government had the right to purchase it after a term of 
60 years, but China had no right to repurchase. 

Dr. Koo said that Baron Shidehara was, perhaps, referring to 
the charter of the company, but the Shantung Railway Co. had 
made an agreement with the Chinese Government on March 21, 
1900, in article 28 of which the right of purchase was invested in 
the Chinese Government in explicit terms. 

Baron Shidehara said that, nevertheless, the Chinese Government 
had not tried to purchase the railway. 

Dr. Koo said that would not prevent the Chinese Government 
from holding the right to purchase. 

Baron Shidehara said that, indeed, that would not prevent the 
Chinese Government from proposing to purchase, but there was no 
obligation on the part of the German Government to sell. 

Dr. Koo said that that was true. But he hoped that Japan would 
not be in the position of Germany, He thought that Japan was a 
friendly power. 

Baron Shidehara said that in that case he would not stick to the 
point of the German term. 

Dr. Koo said that he hoped that the Japanese delegates would 
accept three years. Then the Chinese delegation would be disposed 
to discuss other aspects of the question to which Baron Shidehara 
attached so much importance. 

Baron Shidehara said that, frankly, he was afraid that a three-year 
period was not at all acceptable to the Japanese delegation. 

Dr. Koo asked what would, then, be Baron Shidehara's view as to 
a reasonable period. 

Baron Shidehara said that he found the average period for railway 
loans of comparatively recent dates to be 45 years. Were they to 
deduct therefrom 22 years, which represented the number of years 
since railway concession was made, there would remain 23 years. 
He thought that would be a reasonable period. 

Dr. Koo said that according to that basis of calculation China 
ought to have repurchased the railwaj;- a few years ago. Take, for 
instance, the Nanking-Hanchow Railway. The term was fixed at 
45 years, but according to article 6 of the contract the right of 
purchase was provided for as becoming effectiA'e after 15 years. 
Therefore it appeared that the Shantung Railway ought to have been 
sold to China some years ago. An average period would then not 
be useful as a guidance in respect of their present discussion. What 
would be a useful guide was the period allotted for redemption. In 
the present case the contract was made in 1899: therefore already 
22 years had elapsed. - If three years were added to that, it would 
make already 25 years. 



130 

Baron Shidehara said that they were discussing the question of the 
loan and not redemption. 

Dr. Koo said that even 15 years couhl not be taken as a standard. 
The term fixed for the Nanking-Hanchow Railway was about the 
longest. In the case of the Tientsin-Pukow Eailway the term was 
10 years after the date of the loan. 

Baron Shidehara asked whether, considering that when the railway 
was in the hands of the Germans no term was fixed for purchasing 
back from the Germans, and considering further that the railway 
had never been Chinese property, whether it would not be possible 
for the Chinese delegation to accept the period of 23 years as the 
term of the loan. 

Dr. Koo said that Baron Shidehara's suggestion did not take into 
consideration the fact that in most of these railway contracts there 
were provisions for the repurchase or redemption after a compara- 
tively short period from the date of the loan. 

Baron Shidehara said that that period represented the time in 
which the loan could be redeemed. The terms of the loan itself 
might be different from the terms of redemption. Suppose a period 
of 23 years was decided upon. Within that period, say, after 15 
years, China might be at liberty to pay at once the remaining capital ; 
so that, according to that arrangement, China could redeem the re- 
mainder of the capital after 15 years, but the period of the loan itself 
should be 23 years. 

Dr. Koo said that he desired to ask a question, not to lend them- 
selves to any misunderstanding. He wanted to know whether Baron 
Shidehara meant that the loan was a system of giving credit, as was 
here proposed. 

Baron Shidehara replied in the affirmative. 

Dr. Koo said that the idea suggested by Baron Shidehara of having 
two periods, one for the credit and one for complete redemption, ap- 
peared to the Chinese delegates to be a serviceable one, and in con- 
sideration of the acceptance by the Japanese delegation of the general 
basis of the Chinese proposal, he and his colleagues would accept 
Baron Shidehara's proposal, but they felt that the period was much 
too long. 

Baron Shidehara asked how long a time Dr. Koo would propose as 
a reasonable period. 

Dr. Koo said that while the Chinese delegates did not wish to ap- 
pear as if they were bargaining on the point of the period, the term 
of the credit 'might be increased to 10 years, but with the under- 
standing that any time after three years all the remaining unpaid 
portion of the sum could be paid on certain suitable notice. The 
Chinese delegates really felt that they were going out of their way 
to meet their Japanese friends, in order to make some progress in 
the discussion of that aspect of the railway question. In other words, 
instead of making the payment in six equal installments, all out- 
standing treasury notes might be redeemed on suitable notice after 
the lapse of three years. It was desired the reasonableness of that 
proposition should be recognized, it having been prompted by the 
sincere desire on China's part to meet the Japanese wishes. 

Baron Shidehara said that the fact was that he and his colleagues, 
who were not financial experts, thought it better not to try to-day 
to arrive at a decision as to the period of the loan. At the same time 



131 

"he had understood that the Chinese delegates were prepared to dis- f 
cuss the question of the engagement by the Chinese Government of | 
a chief accountant, a traffic manager, and a chief engineer whom the j 
Japanese capitalists would recommend. If the Chinese delegates j 
would discuss only the period of the loan and did not desire to di^-' 
cuss the question of the engagement, he was afraid he could not pro- 
ceed with the discussion of the question. The question of the en- 
gagement by China of the chief engineer and other experts was one 
to which the Japanese Government attached a great deal of im- 
portance. 

Dr. Koo desired that the Chinese position should be clearly un- 
derstood. The shorter the period of the loan, the more would the | 
Chinese delegates be disposed to consider the question of the engage- \ 
ment of experts. 

Baron Shidehara said that if the period was going to be only three 
years, it would be so short that there would be no need of discussing 
the engaging of experts. 

Dr. Koo asked what Baron Shiclehara's preference was. 

Baron Shidehara asked if Dr. Koo was speaking of the period of 
the loan. 

Dr. Koo answered in the affirmative. 

Baron Shidehara said he had to consult financial experts and ask 
their opinion as to what would be a reasonable term. 

Dr. Koo said that the Chinese delegates had proposed the period 
of three years to meet the Japanese wishes. If the question of period 
should be left uncertain, he and his colleagues would feel it difficult 
to justify themselves in proceeding with the question of engaging 
Japanese experts. 

Baron Shidehara said that he did not mean to leave the question 
of period unsettled. The loan in question was to be furnished by 
Japanese financiers, and therefore it was necessary that their opinion 
should be had. 

Dr. Koo said that that would be arranged between the Japanese 
Government and the Japanese capitalists. The Chinese delegates 
themselves were not financiers. They were not specifically author- 
ized by their Government and they were not in a position to accept 
anything definite in this respect. They also would like to have the 
benefit of the advice of their financial experts. 

Baron Shidehara proposed that they should adjourn until the fol- 
lowing day and consider the matter overnight. 

The press communique was issued in the annexed form (An- 
nex III). 

The meeting adjourned at 5 o'clock p. m. until 3 o'clock p. m. 
Saturday, December IT, 1921. 

Washington, D. C, Becemher 16, 1921. r 

SJC'-14.] 

Annex I. 

December 16. 1921. 

Chinese delegation — Proposal concerning inode of faynient. 

A. The total amount of reimbursement for the Tsingtao-Tsinanfu 
Eailway properties and their permanent improvements on and addi- 



132 

tions to them, as provided for in the agreement of this day, shall 
be paid in six equal installments. 

B. The first installment to be paid Avithin nine months after the 
coming into force of the agreement on the whole Shantung question 
and on the day on which the transfer of said properties is completed. 

C. The remaining installments shall be paid in treasury notes se- 
cured on the revenues of the said railway properties. 

D. The said notes shall be delivered on the same day on which the 
first payment is made. 

E. The said notes shall be redeemed at intervals of six months in 
equal amounts. 

F. Pending redemption, the said notes shall bear interest at 

per cent per annum. 

G. Chinese delegation is prepared to recommend to the Chinese 
Government to give an assurance that in the operation of the said 
railway there will be no discrimination against traders of any for- 
eign nationality. 



SJC-14. 



Annex II. 



December 16, 1921. 



Outstanding amounts of Chinese Clorernmcni raihrau loans, December, 1921. 
(List prepared by the Chinese Delegation.) 



Name of loan. 


Date 

of 
issue. 


Rate. 


Term of re- 
demption. 


Security. 


Amount outstand- 
ing at December, 




Years. 


Date. 


1921. 


Peking-Mukden Railway. . 

Shanghai-Nanking Rail- 
way. 
Shanghai-Nanking land . . . 
Tao-Ching Railway 

Canton-Kowloon Railway. 

Tientsin-Pukow Railway . 
Do . 


1900 

1904 

1914 
1905 

1908 

1908 
1911 
1908 

1909 
1911 
1913 

1914 


PCTCt. 

5 

5 

6 

5 

5 

5 
5 
5 

5 
5 
5 

6 


45 

50 

10 
30 

30 

30 
30 
30 

30 
40 
40 

20 


1944 

1953 

1923 
1935 

1937 

1938 
1940 
1938 

1938 
1951 
1952 

1933 


Railway itself and its earn- 
ings. 


£1,322,500.00 

2,900.000 00 

60, 000. 00 


do . 


General revenue of the Gov- 
eniment and railway reve- 
nue. 

Railway itself and its earn- 
ings. 

Likin of three Provinces 

Likin of five Provinces 

Surplus earnings of Peking 
Mukden Railway. 


635,600.00 

1,368,000.00 

4,125,000.00 
2,850,000.00 


Shanghai - Hangchow- 
Ningpo Railway. 


1, 237, 500. 00 
4,250,000.00 


Hukuang Railway 

Lung Hai Railway 

Hu-Foong Railway 




5,954,845-13/7 
4,000,000.00 

375,000.00 


Chinese Government and 

railway itself. 
Surplus of Peking Mukden 

Railway. 


Total 


29,078,445-13/7 




1903 
1904 


5 
5 


30 
35 


1932 
1939 


Chinese Government and 
railway itself. 
. do 




Chengtai Railway 


Frs.26,662,500.00 
38,458,000.00 








Total 


65,120,500.00 




1910 
1911 
1916 
1918 


5 
5 
5 
5 


IS 
25 
40 
30 


1927 
1935 
1956 
1947 






Hsin Feng Railway 

Chen Kin Railway 


¥105,666.68 


PeMn-Mukden Railway 


10, 000, 000. 00 
5,000,000.00 


Kirin-Chang Chun 




6,500,000.00 






Total 


21,606,666.68 

















133 

Annex III. 

December 16, 1921. 

[For the press.] 

Issued ly the Chinese and Japanese delegations. 

The fourteenth meeting of the Chinese and Japanese delegates 
relative to the question of Shantung was held in the Pan American 
Union Building this afternoon at 2.30 o'clock. The discussion on the 
question of Tsingtao-Tsinanfu Eailway was continued. The meeting 
adjourned at 5 o'clock until 3 o'clock to-morrow afternoon. 



FIFTEENTH MEETING. 



The fifteenth meeting, held in governing board room, the Pan 
Americfin Union Building, Washington, D. C, at 3 o'clock in the 
afternoon of Saturday, December 17, 1921. 



PRESENT. 



China.— Dv. Sao-Ke Alfred Sze, Dr. V. K. Wellington Koo, Dr. 
Chung Hui Wang. Secretaries : Mr. T. C. Yen, Mr. Tsai, Mr. Tung- 
Fan Hsu, Mr. C. H. Zee. Mr. Chuan Chao, Mr. Telly Howard Koo. 

Japan.— B^von K. Shidehara. Mr. M. Hanihara, Mr. K. Debuchi. 
Secretaries: Mr. S. Saburi, Mr. E. Kimura, Mr. H. Saito, Mr. T. 
Shiratori. 

Also present as observers : 

The United States of America.— Mv. John Van A. MacMurray, 
Mr. Edward Bell. 

The British Fmjnre.— The Eight Hon. Sir John Jordan, G. C. I.E., 
K. C. B., G. C. M. G.; Mr. M. W. Lampson, M. V. O. 

THE RAILWAY LOAN. 

Dr. Koo said that at the end of the last meetin^j the two delega- 
tions were on the subject of the period of the loan in relation to the 
Shantung Eailway. As he had said, the Chinese delegates naturally 
desired to consult their experts concerning their proposal, in which i 
they had said that the period might possibly be extended to 10 years, | 
on condition that all remaining installments might be paid orTceriCain 
suitable notice after three years from the date of the agreement. 

He and his colleagues were sorry to say, however, that their experts 
had expressed grave doubt as to whether that would in any way sim- 
plify the matter. They were strongly of the opinion, inasmuch as the 
necessary fund could be raised in China from the Chinese bankers, 
that the plan of the payment in cash would be a most convenient 
form of procedure not only for China but for Japan also. As he 
had promised that the Chinese delegates would consult their finan- 
cial experts, he wished to bring that information up before the meet- 
ing. Even from a layman's point of view it appeared that it would 
be simpler if it could be arranged to make a single payment than to 
have the installments spread over several years. 



134 

Baron Shidehnra desired Dr. Koo to tell him very frankly the 
reason why the Chinese delegates preferred a cash payment to the 
arrangement of a loan contract. He understood that a great sum 
of debt remained still unpaid by China ; that there was a large sum 
of debt for which even the interest was in arrears. He had just 
been informed that the interest which had fallen due on December 1 
last on the loan of 1911 between the Yokohama Specie Bank and the 
Chinese board of posts and telegraphs had not been paid. On that 
account the Yokohama Specie Bank was placed in a very awkward 
position in its relation with the shareholders of the loan.' The time 
limit had conje and the money had not been paid. Besides that 
particular loan there was a large amount of loans in regard to which 
the principal and interest had still been left unpaid. Why was 
China specially in a hurry to make payment in cash for the Shantung 
Railway while various other outstanding debts were left unpaid? 
He desired Dr. Koo frankly to tell him the motives for China's 
being in such a hurry in regard to the Shantung Railway payment. 
Dr. Koo said that in the case of the Shantung Railway -Chinese 
bankers had expressed their readiness to supply money. In other 
cases the Chinese Government had not been so fortunate. As the 
Japanese delegates were aware, every Government had very limited 
sources of income, and to meet some unexpected expenditure they 
Avere obliged to fall upon such assistance as might be offered by indi- 
viduals. As to the other loans mentioned by Baron Shidehara, of 
which the interest had not been paid, it appeared that the Chinese 
people themselves saw that so many of those loans had been con- 
tracted without much difficulty in circumstances which did not give 
them any concern. They naturally hesitated to offer any such assist- 
ance as in the case of the Shantung Railway. Moreover, the very fact 
that there were a number of loans of which the payment of the inter- 
ests was in arrears served as further explanation as to whj'^ the 
Chinese people desired to contract no further foreign loans. 

Baron Shidehara asked whether it was the policy of China not to 
contract any further foreign loans. 

Dr. Koo said that he did not know whether he had made his 
point of view clear. Whenever the Government could not raise money 
at home, they had to get it from abroad. In other words, in these 
matters the Government Avas not altogether its own master in China 
as in other countries. They depended upon the readiness on the. 
part of the people to invest in public securities. 

Baron Shidehara said that in the case of the Yokohama Specie 
Bank loan it was secured on the revenue of the Peking-Hankow 
Railway, but when the Specie Bank made inquiries of the Chinese 
Government as to the payment, it was told that there was no longer 
any revenue remaining on the railway. He understood that the 
Peking-Hankow Railway was a very paying concern, but still the 
loan secured on that railway was in default. The Japanese people 
would naturally wonder why China, in such a situation, should be 
in a special hurry in making cash payments for the Shantung Rail- 
Avay, but that would be repeating the same question he had alread}' 
put to Dr. Koo. In any case, he desired to ask whether the observa- 
tions just made by Dr. Koo meant that the Chinese delegates desired 
to withdraw their proj^osal of the day before. 



135 

Dr. Koo said that he had stated the opinion given by the Chinese 
financial experts, which strongly supported the legitimacy of the 
plan of cash payment, but if it was desired by the Japanese delega- 
tion to settle the question of the payment he and his colleagues were 
disposed to fall back upon the plan of the three-year period. He 
had frankly to say that they would try to do their best under the 
circumstances to minimize, so far as possible, the anxiety on the part 
of the Japanese investors in China. Especially in view of the 
belated payment of the Specie Bank loan of 1911, the Chinese propo- 
sition would really, it appeared to them, be preferable. Instead of 
adding to the anxiety of the Japanese bankers that would help 
liquidate the payment at once ; within nine months there would be no 
portion remaining unpaid. 

Baron Shidehara thought that he had already explained the 
reason why it was difficult for the Japanese delegates to agree to the 
plan of cash payment, and it would perhaps be unnecessary to repeat 
his observation. In this situation the proper way would be to 
proceed with the discussion on the Chinese proposal of the day 
before. To proceed with the discussion of that proposal, he would 
like to ask a question. The Chinese delegates used the term " treas- 
ury notes." He would ask if this was used in order to show that 
the arrangement was a short-term loan. 

Dr. Koo said the treasury notes were suggested merely because 
they were probably the simplest kind of evidence for the unpaid 
portion of the amount. 

Baron Shidehara said that his understanding was that the treasury 
bills, or treasury notes, indicated a kind of short-term loan. When 
the loan extended for several years some other term was generally 
used. 

Dr. Koo said that the term " treasury notes " was used in the 
contract of the Lee-Higginson loan, and also in some other loan 
contracted in 1916 with certain bankers in the United States. 

Baron Shidehara thought that the case was usually this, that when 
the Government had liability and did not find it wise to pay at once, 
but thought the fund could be raised in six months or at the end of 
a fiscal year, treasury notes were issued. They were a kind of short- 
term loan. 

Dr. Koo said that he might be wrong, but the treasury notes were 
used by a great many Governments in payment of liabilities which 
they might have incurred for a more or less limited term. That 
was the case, he understood, with the United States Government also. 

Baron Shidehara said that that was usually the case; he under- 
j^tood that they were for short terms. 

Dr. Koo said that in the case of the Lee-Higginson loan the term 
Avas 30 years. 

Baron Shidehara said that that was a minor point, only he wanted 
to make himself clear on that point. The Chinese delegates had 
made a proposal the day before, and perhaps it might be useful for 
the Japanese delegates to make some observations concerning that 
proposal. He would like to have it clearly understood at the be- 
ginning that in the mind of the Japanese delegation the only prac- 
tical method to effect a financial arrangement of the nature now 
contemplated would be to conclude a definite loan agreement between 
the Chinese Government and the Japanese capitalists. Apart from 



136 

the question of the various technical difRculties which stood in the 
way of the Japanese Government becomino; a party to such finan- 
cial arrantrement. it seemed hijs:hly undesirable that the Government 
itself should remain directly interested and involved in the Shan- 
tunoj Eaihva^' after it had completely been handed over to China. 
The enterprise was purely of an economic nature and any arrange- 
ment by which the Japanese Government itself retained interest in 
the railway might create much misgiving in the popular mind. It 
might be taken as if there were some political significance in it. Of 
course, the Japanese Government would be glad to use whatever 
influence it might have with its nationals in making the financial 
arrangement of that kind. They were quite read}^ to discuss and 
determine the basis of the arrangement so far as they were com- 
petent to do so. while leaving the matter of detail to be worked out 
by the capitalists, with the approval of the Chinese Government. 
With regard to the period of the financial arrangement now pro- 
posed, the Japanese delegates presumed that the point to which the 
Chinese delegates attached special importance was the period of 
the time after which China would be at liberty to redeem the whole 
outstanding liability, and he realized that the desire of the Chinese 
delegates was to make the term of such extra redemption as short 
as possible. At the same time, from the investors' point of view, 
they Avould naturally hesitate if they were left in uncertainty as to 
their exact position in regard to the payment or the redemption of 
the loan after such a short time as three ^'•ears, since China might 
or might not choose to effect such a redemption. Taking all circum- 
stances into consideration, it seemed to the Japanese delegates reason- 
able that the term of the extra redemption, the term after which 
China would have option of redeeming the whole outstanding lia- 
bility, should be fixed at 10 years instead of 3 years. As regards 
the term during which the loan was to run, he had proposed the 
day before a period of 23 years, but now he would make it a round 
number, namely. 20 years instead of 23 years. As he had stated the 
day before, the Japanese delegates desired the Chinese Government 
to see their way to enlist in the service of the Shantung Railway a 
chief engineer, a traffic manager, and a chief accountant whom the 
Japanese capitalists might recommend. They still placed great im- 
portance on the appointment, especially of the traffic manager and 
ihe chief accountant, to be recommended by Japanese capitalists. 
He would now propose : 

" 1. The financial arrangement to take the form of a loan agree- 
ment between the Chinese Government and Japanese capitalists. 

"2. The loan to run for a period of 20 years from the date of 
the agreement. China, however, to reserve to herself the option of 
redeeming the outstanding liability after a period of 10 years from 
the date of agreement. 

" 3. China to enlist in the service of the Tsingtao-Tsinanfu Rail- 
way, the chief engineer, traffic manager and chief accountant to be 
recommended by the Japanese capitalists, it being understood that 
these railway experts shall be subject to the supervision of the 
Chinese managing director." 

Dr. Koo said that he was not sure whether he understood the 
point of view of the Japanese delegation on that question. On the 



137 

other hand, he was inclined to feel that the spirit in which the 
Chinese proposal had been formulated was not fully appreciated 
by his Japanese friends. The desire of China to make the pa3anent 
of the total amount of the railway properties as soon as possible was 
a perfectly natural and reasonable desire. He did not see why the 
Japanese capitalists,, already having their confidence shaken in 
Chinese securities on account of the belated payment of interest of 
the Specie Bank loan, should be anxious to make this loan to China. 
In the second place, the Chinese delegates had already expressed 
their desire to effect the payment in installments, not from any desire 
in any way to give even the appearance of discrimination. They 
had made that proposition because they had received offers from 
the Chinese bankers to finance the Chinese Government, as had been 
explained on more than one occasion. Japan wanted to retain her 
interest lest her position might be misunderstood in Japan. For 
that reason, the original Chinese proposition had been modified so 
that the payment might be spread over the period of three years. 
The reason why they could not see their way to accept longer periods 
they had tried to explain the day before. The Shantung Railway 
stood in a different class from other railways in China for the con- 
struction of which loans had had to be secured. As regards the 
enlistment in the service of this railway of persons for three im- 
portant posts to be recommended by the Japanese capitalists, he was 
not sure whether the Japanese delegates would not lend themselves 
to an impression outside that in turning over the railway to China 
they wanted to retain a substantial portion of the control thereof. 
It seemed that, with the progress of their conversation, the two 
delegations were, instead of coming together, drifting farther apart 
on this question of payment. 

Baron Shidehara said that the Japanese delegates regarded the 
first point Dr. Koo had just mentioned as a just one. There were 
still a large amount of loans on which the interest had not been duly 
paid. People interested in the Yokohama Specie Bank loan and 
in the other loans on which the payment had been delayed, desire 
that the interest should be paid at once. While on the one hand 
failing to fulfill obligations, China proposed to make cash payment 
for the Shantung Railway. The Yokohama Specie Bank, for in- 
stance, naturally would raise the question why payment on its loans 
were delayed when China could help it. The public mind would infer 
that the reason was that China did not want Japan to have interest 
in the Shantung Railway. It would create great misgivings in the 
popular mind. He did not think it necessary to repeat that point 
once again. In the second place, he knew that the Chinese delegates 
had proposed to spread the payment over three years, but that did 
not give any benefit at all to the Japanese bankers who desired in- 
terest in the railway. If the loan were to be redeemed after only 
three years, there would hardly be any reason why ihej should be 
interested in it at all. Dr. Koo had said that Japan would be re- 
taining the control of the railway. 

That was far from the intention of the Japanese delegates. They 
were going to recognize the full control and operation by China ex- 
clusively, and the Japanese proposal certainly indicated that those 
experts would be under the supervision of the Chinese railway 
authorities. Thev would not control the railwav, the control would 



138 

be left with the Chinese authorities. The experts were meant to be 
' their assistants, to be placed under tlie direction of the Chinese 
authorities. If his Chinese friends thought that those assistants 
would control the railway he would assure them that nothing was 
farther from the intention of himself and his colleagues. He did 
not think that the two delegations were drifing very much apart, as 
had been thought by Dr. Koo. The Chinese delegates now proposed 
3 years and 10 years, respectively, for the period of redemption and 
for the term for which the loan would run. The Japanese proposal 
was simply to extend the period to 10 years "in the one case and to 
20 years in the other. He had been given to understand that the 
Chinese delegation did not place as much importance on the period of 
the loan as on the period for the option of redemption. The Japa- 
nese delegates now proposed 10 years for this latter period, instea'l of 
15 years, as had been proposed on the previous da3^ 

Dr. Koo said that he did not know- whether he had made himself 
clear in saying that the reluctance of the Chinese bankers to come 
to the aid of the Government in regard to the belated payment had 
been due to several causes, one of which was undoubtedly the fact 
that the important Shantung question had remained unsettled. It 
was quite possible, if that question could be solved in such a w^ay as 
to give no color even to an impression that while norminally turning 
over the railway to China, Japan still retained its control, the ground 
would be prepared for the Chinese bankers to assist the Government 
in regard to the belated payments. As to the three-year period, he 

(need not disguise his feeling. There was a great difference between 
3 and 10 years, and 10 and 20 j^ears. Baron Shidehara had expressed 
the view that if the term was made too short the Japanese investors 
might not be interested in the loan. That brought in a new aspect. 
In offering the three-year period the Chinese delegates had hoped to 
meet the Japanese desire in order to prevent any misgivings arising 
in Japan. Japan desired to retain some interest in the railway. To 
meet that desire the Chinese delegates had modified their original 
proposal by substituting the three-year period for an immediate cash 
payment. He had now to express his gratification that Japan dis- 
claimed any intention of retaining control of the railway. In that 
case, the Japanese delegation would not insist upon the three very 
important posts being filled on recommendation by Japanese capi- 
talists. 

Baron Shidehara said that he disclaimed the intention on Japan's 
part to exercise the control of the railway; he would confirm that. 
But he had to insist that those most important posis mentioned in his 
counterproposal should be filled by Japanese experts. Their appoint- 
ment seemed to him to be of great importance from the point of view 
of the Japanese capitalists who might be interested in that question. 

Dr. Koo said that the Japanese proposition appeared to confirm 
one of the reasons which the Chinese delegates had had in mind for 
preferring a single payment. They wished to avoid entering into 
any more loans, in order to preclude any such appointment of im- 
portant experts. He was quite sure that the Chinese anxiety on that 
/(point was fully intelligible. It was hardly necessary to add that the 
pmver of recommendation in regard to the three main posts con- 
stituted an important control of the line, which the Japanese dele- 
gates had proDosed that China should retain exclusively to herself. 



139 

Baron Shidehara said that he did not see hoAv such a construction 
could be placed on the Japanese plan. It was the Chinese managing 
director who would issue instructions to these experts, who would 
control the latter and the whole railway. The Japanese experts 
would no more control the railway than he (Ambassador Shide- 
hara) was controlling the whole machine of the Japanese Govern- 
ment. 

Dr. Koo said that he was quite sure that Baron Shidehara would f 
see that the power to recommend candidates for those important | 
i^osts to the Chinese Government, with the implication that they 
should be accepted, would constitute an important element of control, j 

Baron Shidehara said that if certain persons recommended' were 
not agreeable to the Chinese Government they had only to say so. 
The Japanese capitalists would recommend others. It was the Chi- 
nese Government which appointed those men. He added that that 
was not to be regarded in any way as a special feature of the pro- 
posed arrangement, but that it was quite a common practice very 
generally accepted in the cases of various other railway loans. 

Dr. Koo said that, in the first place,, not all loans were accom- 
panied by the privilege of recommendation for those three posts. 
In the second place, those other loans had been made because it was 
necessary for the Chinese Government to raise money and could not 
obtain iit from the Chinese people. In the present case, as he had 
stated on several occasions, China preferred an immediate payment, 
as the Chinese people were ready to finance the railway. It would 
be very difficult for the Chinese delegates to explain why preference 
should be given to any foreign national at the expense of the right 
of the Chinese people and against their wishes. The question of 
loan arose when China could not raise money herself. Just to illus- 
trate: The Japanese Government would issue loan in the Japanese 
market if they could. Only when they could not do so in Japan on 
the same favorable terms, they would have recourse to foreign mar- 
kets. He mentioned that not for aiij other reason than to make 
clearer the Chinese standpoint. Great difficulties would confront the 
Chinese delegates if thej^ ignored the earnest offer of the Chinese 
bankers to provide funds for the present purpose. 

Baron Shidehara said he was afraid that the Chinese delegation 
entirely failed to consider the history of the whole matter. The 
starting point of the two delegations seemed to be a little different. 
He and his colleagues proceeded from the fact that the plan of joint 
enterprise had in itself been a great concession if compared to Japan's 
original plan of full ownership, to which she was entitled. Their 
last proposal was reall}^ a compromise plan. If the history of the 
matter should be disregarded, it would be difficult to reach a satis- 
factory understanding on this complex question. In the case of the 
Specie Bank loan China was under an obligation to pay the interest 
to the Japanese bank, but she had failed to fulfill that obligation. 
In this present case there was no obligation for China to make the 
payment in cash. But still China insisted on paying in cash in this 
case, while failing to discharge her obligation in the other. 

Dr. Koo said that the difference was that, in the case of the arrears 
in payment for the interest of foreign loans,, the Chinese Government 
was unable to persuade their people to lend any financial assistance. 



140 

but that in the present case the people were quite willing to come forth 
with the necessary financial assistance. 

Baron Shidehara said the point was whj^ the Chinese bankers 
should fail to help the Chinese Government in regard to the other 
loans while they were so anxious to offer money in regard to the 
Shantung Kailway. 

Dr. Koo said that the reason was very obvious. They desired to 
remove, as soon as possible, the causes which had disturbed the rela- 
tions l)etween Japan and China. They were people who were inter- 
ested in trade. They wanted the Shantung question to be settled in 
a way that would not tend to perpetuate or to hoard up anxiety and 
disturbing feelings on the part of the Chinese people to the conse- 
quent detriment of their trade interests. 

Baron Shidehara said he did not quite see how the fact that Jap- 
anese capitalists should retain certain interests in the Shantung Rail- 
wav should disturb the friendly relations between the two nations. 

t)r. Koo said that, in the words of Baron Shidehara, they were not to 
forget the history of the question. 

Baron Shidehara said that if an agreement was reached on the 
Shantung question, if it was set at rest forever, he did not see how the 
fact that Japanese capitalists retained a certain interest in the rail- 
v^ay could affect friendly relationship between China and Japan. 
Japan did not ask for any interest other than had been commonly 
requested in regard to other railways in China. 

Dr. Koo said that the Chinese people might very well ask why 
Japan should insist upon having interest in this particular railway. 

Baron Shidehara said that the answer would be quite simple. It 
was only a question of history. Japan had been making concession 
after concession successiA^ely, and had at last come to this final pro- 
posal. It was their last concession. No international question of this 
nature could be settled without a spirit of concession and compromise. 
It was in that spirit that the Japanese delegation proposed this plan. 

Dr. Koo said that Baron Shidehara's statement did not quite de- 
scribe the situation. It would be recalled that the Chinese delega- 
tion had first proposed a single payment, but because of the Japanese 
desire to retain a financial interest in the railway they had modified 
the proposal so that the paj^ment might be spread over three years. 
Taking into consideration their own difficulties, it was as far as the 
Chinese delegation could go. 

Baron Shidehara said he did not think it would be useful to proceed 
any further, both sides repeating the same arguments over and over 
again. He thought it would be better that this matter should be 
handled in a practical and businesslike manner. The Chinese dele- 
gates thought the period of time for the proposed loan was unac- 
ceptable. He wonclered how far, then, would they come to meet the 
desires of the Japanese delegation. 

Dr. Koo said he wished to point out that the present proposal of 
the Japanese delegation was so different from the Chinese proposal 
which had been offered as a concession to meet the Japanese wishes, 
it would be difficult for him and his colleagues to proceed to discuss 
the three propositions offered by Baron Shidehara. 

Baron Shidehara thought the Chinese delegation had' said that if 
for a short term, they would consider the engagement of Japanese 
railway experts. 



141 

Dr. Koo said that he remembered saying that he 7mght consider 
that question of personnel if the period were short. 

Baron Shidehara said he understood that as regards the question of 
period, the Chinese delegates placed more importance on the period 
of redemption. 

Dr. Koo said that it was naturally so, but that they desired the 
duration of payment should be made three years, so that they might 
be able to explain to the Chinese bankers that if they wished they 
could finance the railway as soon as it had been redeemed at the end 
of the three short years. 

Mr. Hanihara asked Dr. Koo if he did not see the reasonableness 
of the Japanese desire to retain a certain interest in the railway. 

Dr. Koo answered that it was the very reason why they had sug- 
gested three years instead of cash payment. If the Japanese dele- 
gation started from the Chinese concession, he did not see how there 
could be a fair agreement. When the Chinese delegation had said 
three years, it was in order to meet the Japanese desire to retain a 
certain interest in the railway. 

Mr. Hanihara said that, apart from the question of the duration 
of payment, if it was admitted that Japan should retain interest in 
the railway it would actually have to retain interest. In other words, 
the interest granted must not be meaningless. He wondered if that 
could be done if the payment were to be made in the form of the 
treasury notes of the Chinese Government. 

Dr. Koo thought the interest sought by Japan was financial in 
nature. 

Mr. Hanihara said it was a financial interest, but that it must be a 
substantial interest such as other nationals had been granted in other 
railways in China. 

Dr. Koo asked if Mr. Hanihara was speaking of the period of 
payment. 

Mr. Hanihara said he was speaking of interest. 
Dr. Koo said that the question of enlisting expert assistance could 
only be taken up after the question of period had been disposed of. 

Mr. Hanihara inquired whether the Chinese delegation were pre- 
pared to contract a loan in the form suggested by Baron Shidehara 
if the period of the loan, or rather the period of redemption, was 
made three years. (Mr. Hanihara hastened to add that he did not 
mean to propose that period for the said loan.) 

Dr. Sze said that China desired the mode of payment to be as 
cheap as possible. If the payment was made in treasury notes the 
Japanese Government could keep them and China could tell her own 
bankers that the payment was only being made in installments. If, 
on the contrary,^ the bonds were placed in the hands of banl^ers, they 
would discount them and the Chinese bankers would come to the 
Chinese delegates and say: "Why not give us first chance? " The 
whole idea was to find a way for the solution which would not place 
the Chinese delegates in a difficult position. The whole matter was 
of small importance from the point of view of the Chinese Govern- 
ment because the whole amount was small. 

Mr. Hanihara said that supposing the Japanese people desired 
certain interest in the railway, it would be unreasonable to expect 
them to be satisfied with the short period of three years. 

93042—22 10 



142 

Dr. Sze said that he understood that this three-year period was for 
option. Options might be, or very often might not be, enforced. 

Baron Shidehara asked if there was not a provision for such an 
option in regard to many of the Chinese railways. 

Dr. Sze said that tlie enforcement of these options depended upon 
the condition of the money market and also on trade. 

Mr. Hanihara inquired whether the Chinese delegates would be 
prepared to consider a loan with the Japanese capitalists, if the 
Japanese delegates agreed to the term of option, or whether they 
would still insist upon making the payment in treasury notes. 

Dr. Koo asked what the most important difference was between 
payment by treasury notes secured upon the revenue of the railway 
and the concluding of a loan Avith Japanese capitalists. 

Mr. Hanihara said that, in the first place, if the treasury notes 
were secured upon the revenue of the railway, the Japanese Govern- 
ment Avould be directly interested in the railway, and in order to pro- 
tect the security it would become necessarj'^ for the Japanese Gov- 
ernment to take proper measures in regard to the railway. It would 
not be desirable eitlier to Japan or to China that a foreign Govern- 
ment should have direct influence in a Chinese railwaj'. If the finan- 
cial arrangement was left to private capitalists, they would recom- 
mend railway officials whom the Chinese Government would employ 
as their own emi^loyees, but if the Japanese Government held Chi- 
nese Government bond the}- would haA^e to send their own officials 
to take part in the operation of the raihvay. 

Dr. Koo said that Mr. Hanihara was assuming that the arrange- 
ment of Japan recommending candidates for those railway offices 
had been accepted, but the arrangement was not accepted in the form 
here proposed. 

Baron Shidehara asked in Avhat form it Avould be acceptable to 
China. ^ 

Dr. Koo said that, as had been stated several times, the Chinese 
delegates would be prepared to consider this question after the other 
question had been disposed of, for a great deal depended upon the 
duration of the payment. The two questions bore upon each other. 
Mr. Hanihara said it was necessary for the Japanese delegation 
first to knoAv Avhether or not the Chinese delegation would be pre- 
pared to conclude a loan with the Japanese capitalists. Only then 
would come the question of the term. 

Baron Shidehara said that the first point of the Japanese counter- 
suggestion was intended to prove beneficial to both countries. There 
might be misunderstanding if the Japanese Government itself were 
to retain any interest in the railway. The Chinese delegation had 
said that the}- would concede a certain interest in the raibvay to 
Japan and that the fact of payment being secured on the revenue of 
the railway was a considerable interest to Japan.- Now, if the Japa- 
nese GoA'-ernment were to hold that interest what would the people 
say about it? They would A^ery naturally read some political mean- 
ing into the arrangement. He had thought it would be much better, 
both from China's point of vicAV and from Japan's, that the financial 
arrangement should be made between the Chinese GoA^ermnent, on the 
one hand, and the Japanese capitalists instead of the Japanese Gov- 
ernment, on the other. 



143 

Dr. Koo said the difficulty about the loan proposal was in making 
suitable explanation to the Chinese bankers as to the reason for tak- 
ing a loan from foreign financiers instead of home capitalists. 

Baron Shidehara thought the circumstances of the case were a 
sufficient explanation. As a matter of fact, the treasury notes were, 
in his understanding, a kind of loan, a short-term loan. 

Dr. Sze said that he viewed it in the light of a deferred payment. 

Baron Shidehara said that deferred payment was in itself in the 
nature of a loan; Governments issued treasury notes as a form of 
short-term loan. It was so in almost every country. 

Dr. Sze found some slight difference between treasury notes and a 
loan. It was nothing more than a sort of a pledge in written form. 
There might be some other term. His impression was that treasury 
notes were more or less in the nature of a promissory note. 

Baron Shidehara thought he had before made it sufficiently clear 
that the Japanese Government was not in a position to take treasury 
notes — to conclude a financial arrangement of that nature with a for- 
eign Government. If they did, however, it would certainly create a 
false impression in the Chinese mind as well as in the Japanese. 

Dr. Koo said that as far as China was concerned there was no 
ground for misgiving because the Chinese Government would be pay- 
ing only what was due from her. 

Baron Shidehara asked if Dr. Koo's remark would hold good even 
if the Japanese Government was to retain an interest in the railway. 

Dr. Koo answered in the negative. He said that, as a matter of fact, 
the amount of payment whicii was due from the Chinese Government 
was to the Japanese Government, and certainly not to the Japanese 
subjects. He did not, therefore, see how there could be any misgivings 
in China so long as the payment was made from time to time by 
installments. 

Baron Shidehara reminded Dr. Koo that before the complete liqui- 
dation of the payment took place the Japanese Government would 
have interest in the railway. Dr. Koo had said that China would be 
giving considerable interest to Japan, in that the remaining install- 
ments would be secured upon the revenue of the railway. 

Dr. Koo said that the Chinese delegation had not at first mentioned 
the matterof security. It was the Japanese delegation that had raised 
that question. He suggested that the question of security might well 
be dropped. 

Baron Shidehara understood the reason why the Chinese delegation 
had put in this clause concerning security was in order to meet the 
Japanese wishes to retain an interest. He wondered if that was not 
the position of his Chinese colleagues. 

Dr. Koo said it was to meet the Japanese wishes. 

Baron Shidehara desired to ascertain if the Chinese delegation were 
ready to permit Japan to have interest in the railway. 

Dr. Koo said : " Financial interest; yes." 

Baron Shidehara said that the point he had raised was this : If the 
Japanese Government, instead of the Japanese capitalists, were to 
retain that interest, it would be a source of misgiving; it might be 
said that after handing over the railway completely to China the 
Japanese Government still retained interest in it. He did not think 
it desirable. 



144 

Dr. Koo said that the difficulty that confronted them was due to 
the fact that Japan was asking two things which were contradictory, 
which were hardly to be reconciled with each other. Japan did not 
want single payment, but, on the other hand, would retain interest 
in the railway. If interest in the railway should be given to Japan, 
it would create an undesirable impression because the debt was owing 
to the Japanese Government. If Japan did not insist on retaining 
interest in the railway, and if she was not opposed to a single pay- 
ment, the question would be simplified. 

Baron Shidehara thought the Chinese delegation had been ready to 
spread the payment over three years, during which period of time 
they were ready to allow certain interest in the railway to Japan. 
That was their position. The Japanese delegation now said that the 
question was whether the Japanese Government or Japanese capital- 
ists should be the party to the financial arrangement. That was the 
IDoint at issue. As far as he Imew, there was no Government that had 
any interest in railways in China. If the Japanese Government had 
a claim of interest in the railway, such a claim would give rise to 
an erroneous impression. As he had said several times before, Japan 
simply wanted to have in the Shantung Railway an interest of the 
same nature, of the same significance, and to the same extent as 
China had granted to other nationals. She was not asking anything 
more than what had been already conceded to foreign nationals in 
regard to other Chinese railways. 

Dr. Koo said that this interest was to be held only so long as the 
payment was not completed; that was to say, only for three years 
under the Chinese plan. Considering the special circumstances 
under which this railway question had arisen, the fact of the Japa- 
nese Government retaining interest of that kind need not neces- 
sarily raise serious objection. The Canton-Hankow Railway had 
been repurchased with the capital furnished by the Hongkong Gov- 
ernment. 

Baron Shidehara asked if the Hongkong Government retained 
any interest in the line. 

t)r. Koo said that the Hongkong Government did not desire it. 

Baron Shidehara said that if the Japanese Government were to 
retain interest in the Shantung Railway, it would look queer, for, 
in the nature of things, such enterprises should be left to the ac- 
tivities of private individuals. 

Dr. Sze said that if the arrangement was confined to the period 
during which the payment was pending, it would not, at least, be 
prejudicial to the interests of the Chinese bankers and it would 
certainly be easier to explain the matter to them. 

Mr. Hanihara said that it would make a great difference. If 
the Japanese Government held the treasury notes of the Chinese 
Government it would have the result of Japanese Government offi- 
cials participating in the operation of the Shantung Railway. 

Dr. Koo said it would undoubtedly be true if it was assumed that 
the engagement of Japanese assistance in the service of the railway 
had been -accepted by China. 

Baron Shidehara said that he did not understand, however, that 
it was the intention of his Chinese friends to oppose the plan of rec- 
ommendation by Japanese capitalists. They had said that they were 



145 

ready to consider the matter if the term of the loan was fixed for a 
short period. 

Dr. Koo said that the Chinese delegates were ready to discuss the 
matter, but not under the plan now proposed by Baron Shidehara. 
It was diiRcult to reconcile it with the idea of surrender of the full 
control of the railway. 

Baron Shidehara inquired if the Chinese delegation proposed to 
make the Japanese Government, instead of Japanese capitalists, the 
party to the financial arrangement under discussion. 

Dr Koo said originally the question was very simple; it was only 
a debt owing from the Chinese Government to the Japanese Govern- 
ment. Nobody would object to the Japanese Government receiving 
payment of a debt due from the Chinese Government. Complication 
came in because of the Japanese desire to retain interest in the rail- 
way. 

Baron Shidehara asked if the Chinese delegates did not say the}' 
were reacW to accord that interest. 

Dr. Koo said it was not an interest of such a nature as would be 
objectionable from the point of view of public opinion. 

Baron Shidehara said it was an interest similar to that accorded 
to capitalists of foreign countries. He would ask Dr. Koo if there 
would be no objection to the Japanese Government holding such in- 
terest in regard to the Shantung Railway. 

Dr. Koo said there would not be any objection. So long as the 
Chinese Government had not completed their payment to Japan, the 
interest of the Japanese Government in the railway would remain 
to the extent of the unpaid installments. 

Baron Shidehara said he hoped his Chinese colleagues would ap- 
preciate this point, that Japan was not asking anything more than 
was granted to others in Chinese railways. It was merely proposed 
to place the Shantung Railway on the same footing as many other 
railways in China. There was no special feature in the Japanese 
loan proposal as compared to other railway loans. 

Dr. Koo said that the position was this, that because of the re- 
purchase of the Shantung Railway, the Chinese Government in- 
curred debt to the Japanese Government. China desired to pay it as 
soon as possible ; but, in order to pay this debt, Japan desired China 
-to incur another debt to Japanese capitalists. The Chinese delegation 
had said, moreover, that if their proposal in respect to the duration 
of the period was accepted the}^ would consider the question of em- 
ployment of Japanese experts. 

Baron Shidehara said that it would be very unfortunate if they had 
to drift apart on the difference between 3 years and 10 years. | 

Dr. Koo hoped that they might agree upon 3 years, so that they 
might proceed to the question mentioned in the third paragraph of 
Baron Shidehara's proposal. 

Baron Shidehara said he was sincerelv under the impression that 
the Japanese proposal was quite reasonable and the period they had 
proposed was very fair. 

Dr. Koo asked Baron Shidehara if the period of 10 years was to 
be the term of the loan. 

Baron Shidehara said that it was proposed to be the term after 
which China should have full option of redemption. He thought the 



146 

Japanese suggestion in that respect had been made sufficiently clear 
in paragraph 2 of the counterproject. 

Dr. Sze said that the period of 10 years, if counted from the time 
of construction, would not be very long, but, counted from now, it 
was much too long. 

Baron Shidehara said that the Japanese suggestion was intended 
to protect the interests of investors, of those who would subscribe 
to this loan. The respective periods mentioned in the Japanese 
counterproject seemed to be quite necessary for that purpose. 

Dr. Koo regretted that there had not been much progress made. 

Baron Shidehara said that the only way there seemed to be was 
the reconsideration of the whole matter by each side. 

Dr. Sze said that the Chinese delegates had gone beyond authoriza- 
tion. They had met the Japanese point as far as possible. If the 
period of three years could be accepted it would make easier their 
explanation; their people at home would be lenient with them for 
gomg beyond their instructions. He hoped the Japanese delegation 
would be so good as to take into consideration the situation as it was. 
In the meantime he would like once more to assure the Japanese dele- 
gation that there was no idea of discrimination or prejudice against 
Japan, or in any way jeopardizing Japanese trade. 

Baron Shidehara said there were difficulties on both sides. The 
Japanese delegation, on their part, had been proceeding this far on 
their own responsibility. They were being animated by the same 
spirit. 

Mr. Hanihara wondered if there might not be some means for the 
Chinese delegation to make satisfactory explanation to their people at 
home, so that they might understand the reasonableness of Japan 
wishing to retain an interest, some reasonable interest, in the railway. 
The two delegations were, after all, meeting here, not to antagonize 
each other, but to find a solution satisfactory^ to both. 

Dr. Sze said that if the Japanese delegation knew the real character 
of the difficulty which confronted the Chinese delegation, they would 
be simply surprised. The whole trouble was that this question of 
Shantung had been left so long undecided. 

Mr. Hanihara said that they would meet again on Monday, and 
that the space of time between then and Monday would prove of 
much help to the two delegations in coming to an agreement. 

The press communique was agreed upon (Annex I) and the meet- 
ing adjourned at 5.30 p. m. until 3 p. m. next Monday. 

Washington, D. C, Deceviher 17, 1921. 

S.TC-15.] 

Annex I. 

December IT, 1921. 
[For the press.] 

Issued hy the Chinese and the Japanese delegations. 

The fifteenth meeting of the Chinese and Japanese delegates rela- 
tive to the question of Shantung took place in the Pan American 
Union Building at 3 o'clock this afternoon. There was a further 
interchange of views on the question of Tsingtao-Tsinanfu Railway. 
The meeting adjourned at 5.30 p. m. until 3 o'clock Monday after- 
noon. 



147 

SIXTEENTH MEETING. 

The sixteenth meeting, held in governing board room, the Pan 
American Union Building, Washington, D. C, at 3 o'clock in the 
afternoon of Monday, December 19, 1921. 

Present. 

China. — Dr. Sao-Ke-Alfred Sze, Dr. V. K. Wellington Koo, Dr. 
Chung Hui Wang. Secretaries : Mr. T. C. Yen, Mr. Tsai, Mr. Tung- 
Fan Hsu, Mr. C. H. Zee, Mr. Chuan Chao, Mr. Telly Howard Koo. 

Japan. — Baron K. Shidehara, Mr. M. Hanihara, Mr. K. Debuchi. 
Secretaries: Mr. S. Saburi, Mr. E. Kimura, Mr. H. Saito, Mr. T, 
Shiratori. 

Also present as observers : 

The United States of America.— Mr. John Van A. MacMurray, Mr. 
Edward Bell. 

The British Empire. — The Eight Hon. Sir John Jordan, G. C. I. E., 
K. C. B., G. C. M. G. ; Mr. M. W. Lampson, M. V. O. 

RAILWAY LOAN. 

Dr. Sze said that toward the end of the last meeting they were 
discussing the period in which the payment for the railway should 
be made. Dr. Koo had said that if the two delegations could de- 
" termine that point, he thought they would be free to discuss other 
points. The Chinese delegates would be giad to hear the views of 
the Japanese delegates on that point. 

Baron Shidehara wondered if the Chinese delegates had been able 
to reconsider the question of the period and to modify their posi- 
tion in that connection. 

Dr. Sze said that the position of the Chinese delegates was very 
difficult. However, in order to find a way out of the difficulties 
confronting the two delegations, the Chinese delegates had taken 
upon themselves the responsibility to offer a new proposition so 
that they might proceed further. The original plan was, first, that 
the payment would be deferred for three years, and at the end of 
the three years the Chinese Government would be free to exercise 
the option for redemption; and, secondly, that the term of the loan 
was to be 10' years. Now it was proposed that the 10-year term 
would be increased to 12 years. The Chinese delegates had been 
discussing among themselves about this point, but had not had time 
to consult their home Government. He hoped that the Japanese 
delegates would appreciate that the Chinese proposition was being 
made from their genuine and sincere desire to close this, question 
at the earliest possible date. He hoped that the Japanese delegates 
would find it possible to meet the wishes of the Chinese delegates. 

Baron Shidehara said that if it was possible for the Chinese dele- 
gates to give the Japanese delegates satisfaction in the question of 
experts to fill the three posts, upon recommendation by the Japanese 
capitalists, the Japanese delegates would be ready to accept the Chi- 
nese plan, with the modification that the period for the term of extra 
redemption should be five years instead of three years. He hoped 
that it would be possible for the Chinese delegates to go so far to 



148 

meet the Japanese delegates. He thought that five years for ther 
term of extra redemption and 12 years for the term of the loan was* 
a very reasonable proposition. 

Dr. Sze said that the Chinese delegates had given a careful con- 
sideration to the matter and had tried to find a way at once accept- 
able to Japan and easy to explain to the Chinese people. At first, 
they had thought they would offer five years for the period of re- 
demption and another five years for the term of the loan, but they 
found that that arrangement Avould be more difficult to explain to 
the people, and so they had decided upon extending the whole term 
to 12 years. At present the people were more or less excited, and 
it would be easier for them to understand if there was fixed a short 
term after which they could ui^e their option. After all, when the 
period of redemption actually came, the situation might have so 
changed that China might not exercise the option at all, but the 
Chinese delegates wanted to leave the term for redemption at three 
years because it would be easier to explain. 

Baron Shidehara said that about the term of this arrangement 
the Japanese delegates had first proposed 20 years, but now they 
said 12 years. He thought, hoAvever. that three years, which it was 
proposed to be the period after which China might exercise the op- 
tion of redemption, would be too short. The Japanese people might 
think that their delegates had been fooled. The difference now was 
only two years, and if that term was accepted he could promise that 
he would do his best to recommend to the Japanese Government that 
their arrangement should be approved. 

Dr. Sze repeated that the Chinese delegates had thought among 
themselves that the 5-5 formula for the years of redemption and the 
loan might be advisable, but they had found it impossible to lengthen 
the redemption term, and so proposed 12 years for the term of the 
loan. 

Baron Shidehara reminded the Chinese delegates that he was not 
trying to bargain ; he was simply trying to give a niore' favorable 
impression to the Japanese people. 

Dr. Sze said that the Chinese delegates had given almost what was 
beyond their power. 

Baron Shidehara asked whether the Chinese delegates really 
thought five years too long. 

Dr. Sze said that the difficulty was in getting the people to come 
to their point of view. The whole idea was that it was easier to get 
the people reconciled if the three-year term was adopted. 

Baron Shidehara said in any case the difference was so small. He 
suggested that they might proceed to point 3. 

Dr. Sze asked whether the treasury-note plan had been accepted 
by the Japanese delegation, 

"Baron Shidehara said that if the Chinese delegates could give 
the Japanese delegates satisfaction in regard to the question of point 
3, they would, on their part, be ready to reconsider their proposition 
on that point. 

Dr. Sze said that as the Chinese delegates had been pressed by 
the Japanese delegates, they had already given the real reason why 
Chinese bankers desired to finance the railway. The profit was the 
principal motive. If the form of tlie treasury notes were taken, the 
Chinese bankers would find no reason for complaint. As to the 



149 

appointment of the technical experts, the efficiency of the manage- 
ment of the railway would be the principal concern of the Chinese 
Government as well as of the Japanese Government, China was 
very anxious to have a good management of the Shantung Railway, 
so that it would be a financial success. He thought that, perhaps, 
experts on some other line in China might be utilized in the Shan- 
tung Railway in order that an efficient management could be se- 
cured. The main point in the Japanese proposal, as he took it, 
was to have the line well managed. If only proper men were em- 
ployed on the line, fair treatment could be assured to all trade. 

Baron Shidehara said he did not exactly follow the meaning of 
the Chinese proposition. He inquired whether it was impossible 
for China to engage Japanese experts. 

Dr. Sze said that was not exactly the case. The fact was that China 
was aiming at economy in the operation of the railway as far as 
possible. The Shantung- Railway, when it was handed over to 
China would best be joined to the Tientsin-Pukow Railway, so 
that the salaries of officials, etc., might be saved. At present, the 
stations of the two railways at Tsinan were about 100 yards apart, 
and there was no through service, but in future the two railways 
would be run as one system, and in that case experts of the Tien- 
tsin-Pukow Railway might be utilized on the Shantung Railway. 
The Chinese delegates did not have in mind to reject any of the 
Japanese experts. The whole idea of the Chinese delegates was 
that economy and efficiency should be attained. 

Baron Shidehara wondered whether, in speaking about the for- 
eign experts engaged by the Tientsin-Pukow Railway, Dr. Sze had 
in mind that part of the line from Tientsin to Tsinan. He under- 
stood that in the southern section there were some British experts 
engaged. 

Dr. Sze replied that there was. a British chief engineer. 

Baron Shidehara inquired whether there was a British chief en- 
gineer for the northern section of the line. 

Dr. Sze replied that he was not sure. Mr. Dartman Avas the 
chief engineer until 191T for the northern section, but his duties had 
since been taken over by the Chinese assistant chief engineer. 

Baron Shidehara inquired whether he was correct in understand- 
ing that there still was a British engineer in chief in the southern 
section. 

Dr. Sze said that the Peking-Pukow Railway was divided into 
the southern and northern sections at Hantson. During the con- 
struction period, China relied so much upon the chief engineer, but 
after its completion there was very little to call for his assistance. 
There was another British engineer who had. long been in the service 
of the Chinese railways, a Mr. Duckey, who was now on the staff of 
the Peking-Hankow Railway. The Chinese Government desired to 
keep him, firstly, on account of his long service, and secondly, because 
it was very desirable to have a man at hand wdio had much experience 
and local knowledge. 

Baron Shidehara said that he might be wrong, but he had been 
informed that there were, besides a British expert, some other for- 
eigners engaged in the service of the southern section of the Tien- 
tsin-Pukow Railway, 



150 

Dr. Sze said that there might be some traffic inspectors. They had 
charge of traffic in diflferent local sections of the railway. They 
held only junior positions. 

Baron Shidehara said that the Chinese proposition seemed to be, 
in practice, that in regard to the Tsingtao-Tsinanfu Railway there 
would be no special experts employed from Japan. 

Dr. Sze said that he did not wish to be understood in that sense. 
vThere whole idea was that economy should be effected without 
sacrificing efficiency. Personally it had been his dream that all 
railways in China should be brought under one railway system, in 
order that economy should be etiected and facilities should be in- 
creased. It would not be advisable to have a special personnel for 
a railway branch which was only 280 miles long. 

Baron Shidehara said that he had no idea to place any obstacle 
in the way of the unification of the Chinese railways. As a matter 
of fact, however, the Shantung Railway was not so very short. In 
Japan the railways were divided into many sections, which were 
placed under more or less separate management. He thought that a 
line of 280 miles was not a very short one, and it might be worth 
while to have a traffic manager and chief accountant for that section, 
and that it would not in any way prejudice the unification plan of 
all the Chinese railways. His proposition amounted to this: There 
was no objection on his part to China appointing any experts on the 
whole line, and that for the Shantung section she might be able to 
appoint Japanese experts under Chinese supervision. 

Dr. Sze said that as to the traffic manager and the chief accountant, 
it would be best to have some experts appointed with a view to the 
whole line. However, separate books could be kept for the Shantung 
Railway and the Tientsin-Pukow Railway. As to the chief engineer, 
China might appoint a Japanese. He would be asked to look after 
the maintenance of the line in the Shantung district. 

Baron Shidehara said that he was not very particular about the 
name. If the term " traffic manager " was not to the taste of his 
Chinese friends, some such title as "' the manager in chief of the 
Shantung section '" might be used. 

Dr. Sze said that in one of the railways in China they had several 
district managers in the beginning, but later it was found better to 
centralize the duties in one single hand. 

Baron Shidehara said that the Tientsin-Pukow line was quite long, 
but the Shantung line was not short, either. It would be worth 
while to have a district manager in the Shantung section. 

Dr. Sze said that the Tientsin-Pukow Railway was shorter than 
the Peking-Hankow line. But if its various branches were taken 
into account it would nearlj^ match the length of the Peking-Hankow 
in importance. Those branch lines were very important, a quarter 
of the receipts of the whole Tientsin-Pukow system coming from 
them. At any rate he thought that the Tientsin-Pukow and the 
Tsingtao-Tsinanfu Railway should be placed under the same man- 
agement. As for the traffic manager, one person could offer much 
quicker service. 

Baron Shidehara said that he still hoped that the Chinese dele- 
gates would be able to agree that, while a general traffic manager 
might be one person for the whole line, there should be appointed 



151 

for the Shantung Kailway section a Japanese expert, to be recom- 
niended. by Japan. He could be placed under the Chinese super- 
vision. He thought that that was a very modest suggestion on the 
Japanese part. He added that he might suggest that the Chinese 
Government should appoint a general traffic manager for the whole 
combined line of the Tientsin-Pukow and the Tsingtao-Tsinan, 
while Japan might recommend an assistant traffic manager, who 
would be responsible for the Shantung branch only. It was said to 
be the intention of the Chinese delegation to bring the two railways 
under a unified system. That would in no way be obstructed; only 
it was desired that a Japanese expert should be appointed under the 
name of assistant traffic manager, or some such title, to take charge 
of the Shantung branch under the Chinese supervision. 

Dr. Sze said that he was not quite sure whether he had the full 
authority to say that a Japanese might be appointed for the Shan- 
tung Eailway after it became amalgamated with the Tientsin- 
Pukow Eailway. It was a question which had to be referred to the 
legal adviser of the latter line. It might be simply a matter of for- 
mality, but he and his colleagues had not gone through the necessary 
steps in making their suggestion in this regard. When he was 
actually associated with the railway administration of China, he 
had entertained a dream, to which he had already alluded, that all 
railways in China should be unified and run at a minimum cost in 
order that cheaper service might be offered to the public. When he 
was a director of the Peking-Hankow Railway, there were three 
principal assistant managers. Two of them were stationed at Peking 
and Hankow. However, he had decided that the one at Hankow 
could be dispensed with, and thus had effected economy without 
prejudice to the efficiency of the management. To meet the Japanese 
wishes, he had suggested the appointment of a district engineer from 
among the Japanese experts already in the service of the Chinese 
railways. 

Baron Shidehara said that Dr. Sze was talking of the district 
engineer, while the point they were now discussing was the traffic 
manager. He did not thing the Japanese suggestion would in any 
way interefere with the plan of the unification of Chinese railways; 
nor would China have anything to sacrifice in the matter of effi- 
ciency. China would have her own traffic manager for the whole 
system and the Japanese traffic manager would be placed under his 
supervision. He would not be particular about the name of the 
traffic manager; he might, perhaps, be called district traffic man- 
ager. He did not think it would involve special expense to appoint 
one traffic manager for the Shantung Railway section. It would be 
worth while to have a special traffic manager for that section. He 
thought the two delegations were now nearer together. 

Dr. Sze said that his personal idea was that none of the three ex- 
perts were necessary for the Shantung Railway : but. by way of com- 
promise, he had offered that a Japanese engineer might be em])loyed. 
He would state that the Tientsin-Pukow Railway was being run 
ver}^ cheaply, as was clearly shown in the statistics. Cheap service 
was being offered both to passengers and freight, because the running- 
expenses were small. It was deemed most important that the lines 
should be joined with the Tsingtao-Tsinan Railway. Both of them 



152 

would profit by it. At present, on account of the lack of connec- 
tion between them, the shippers had to bear unnecessary expenses. 

Baron Shidehara said that his suggestion was that the Shantung 
Eailway should be considered as a branch of the whole line, and that 
a district traffic manager might be appointed for that branch on the 
recommendation of the Japanese Government. 

Dr. Sze said that at Tsinanfu there was already a large force of 
officials. 

Dr. Koo observed that he was afraid that throughout his col- 
league, Dr. Sze, had been speaking about the engineer, while Baron 
Shidehara had been speaking about the traffic manager. 

Baron Shidehara said that he had not been talking of the engineer. 
The line had already been constructed. He had been suggesting that 
a Japanese traffic manager should be appointed. 

Dr. Sze said that from the point of view of the railway, traffic and 
finance should be unified. In the case of the Peking-Mukden Bail- 
way, there were good connections for Siberian traffic at Mukden. And 
at hrst it was thought more expedient to have an assistant traffic man- 
ager, but later it was found that that was unnecessary. He thought 
that the Japanese delegates would find that an assistant traffic man- 
ager Avould be superfluous. Personally, he thought no special for- 
eign experts would be needed in connection with the Shantung Kail- 
way, but as a matter of compromise he had suggested the appoint- 
ment of a Japanese chief engineer. He thought, if only from the 
point of view of the investors, it would be most advisable to curtail 
the expenses of the management as much as possible. 

Baron Shidehara asked what the function of the chief engineer 
would be. 

Dr. Sze replied that his function would consist in looking after the 
maintenance of the raihvay. 

Baron Shidehara wcridered whether the engineer would have any- 
thing to do Avith the traffic department. 

Dr. Sze replied in the negative. 

Baron Shidehara said that the Shantung Railway having been 
already completed, he thought that an engineer might not be very 
necessary, but the traffic department would always be much occupied, 
so that a special man for that post would be needed. If the Chinese 
delegates felt that the appointment of the Japanese traffic manager 
w^ould create bad impressions or misgivings in the popular mind in 
China, he could not share that view. He had no intention of inter- 
fering in the consummation of the unified system of the Chinese 
railways, and the appointment of a Japanese district manager in 
Shantung would not militate against the idea. 

Dr. Sze said that he thought that in certain cases of amalgamation 
of railways in China, there w^ere no special experts appointed for 
the small lines absorbed. In offering the appointment of a Japanese 
district engineer for the Shantung Eailway, the creation of a new 
precedent was being proposed. It might be added, moreover, that 
it would be impossible to expect that very able Japanese railway 
experts would be willing to assume a post on the Shantung section. 

Baron Shidehara said that if it was a question of life service there 
might be some reluctance on the part of the Japanese railway ex- 
perts to accept a position on the Shantung Eailway, but it was a 
question of only a few years. He felt sure that a good and able 



153 

man might be persuaded to accept that position. Moreover, the ap- 
pointment of the Japanese experts would not be expensive at all if 
the benefit that would accrue from such appointment to the general 
efficiency of the Shantung Railway service were taken into con- 
sideration. 

Dr. Sze said that the figures that one of his experts had just passed 
to him showed the great expense that would be involved in the ap- 
pointment of an extra chief engineer and that he had already been 
placed in an embarrassing position on account of his commitment 
on the point of employing a Japanese engineer. Therefore, he 
hoped Baron Shidehara would not press him any further. If the 
decision was put off another day, he was afraid that there might be 
more figures forthcoming to make his position still more embarrass- 
ing. To sum up, the Chinese proposal was that the delegates should 
recommend to their Government to effect the connection of the 
Tientsin-Pukow Railway and the Shantung Railway at the earliest 
opportunity, with a view to the efficiency and economy of the serv- 
ice; further, to employ a Japanese chief engineer on the Shantung 
section. 

Baron Shidehara said that he felt both sides had now been brought 
much nearer. It was now simply a question of the traffic manager. 
Considering the shortness of the period and the small amount of 
expense that would be incurred, the Japanese suggestion seemed to 
him a very modest one. It seemed to him the more so because the 
Japanese delegation had given up the original plan of a railway loan 
agreement and agreed to take the treasury notes of the Chinese Gov- 
ernment. In fact, he felt that he and his colleagues had gone too 
far and that there might come objection from the Japanese side. 

Dr. Koo §aid that there was not really much difference; that the 
Japanese delegation called it " traffic manager " and the Chinese 
called it " chief engineer." The Chinese delegation had done their 
very best to find a compromise plan out of this very complex situa- 
tion. With the understanding that the Chinese Government should 
declare its intention to appoint for the service of the Shantung Rail- 
way such Japanese engineer as might be found available from those 
Japanese experts who were already in the service of other Chinese 
railways, he hoped that it might be considered that this phase of the 
question had been happily terminated. 

Baron Shidehara said that when they had adjourned the preced- 
ing Saturday there remained three important points in regard to the 
Shantung Railway. The first was the question of treasury notes, 
the second the question of period, and the third the question of railway 
experts. The Japanese delegation had already expressed their will- 
ingness to go far in regard to the first and second questions. Although 
there still remained the minor question of three or five years in regard 
to the period of redemption, if only the Chinese delegation would be 
ready to give them satisfaction in regard to the third point the whole 
question would be practically settled. It might be added that, al- 
though in regard to the third question the Japanese position had iDeen 
that the chief engineer, traffic manager, and chief accountant should 
be engaged by China by the recommendation of Japan, it was not his 
intention to press the point concerning the chief engineer. With 
regard to the other two posts the Japanese delegation would be satis- 
fied that they should be that of district traffic manager and district 



154 

chief accountant, instead of bein<r the principal posts. He thought 
the arrangement would be a fair compromise on both sides. The 
Japanese delegates had compromised very far on the first and second 
questions, so he hoped that his Chinese friends would be read}'^ to 
compromise on this third question. 

Dr. Koo said that the situation was that on the big trunk line near- 
est to the Shantung Railway there Avas no foreign traffic manager, 
though there was a foreign engineer. After the connection of the 
two lines had been effected it would be awkward to have a Jajjanese 
traffic manager on the system. If the Chinese delegates consented 
to have a Japanese traffic manager on the Shantung line they would 
be placed in a difficult position to make an explanation, either to 
their Government or to their people. It would be more desirable to 
have a Japanese engineer instead of a traffic manager to show that 
there was similar treatment on both lines. 

Baron Shidehara said that the Chinese delegation might very well 
explain to their people that this was a compromise plan. If it Avas 
considered that the Japanese traffic manager Avould be under the 
control and suj^ervision of the Chinese general manager, there should 
be no reason for them to be afraid of any such result as Dr. Koo 
had mentioned. As he had stated so often. Japan had made such 
considerable concession since the time of the Paris conference. The 
entire aspect of the matter had been changed since the peace con- 
ference. Japan's only consolation Avould be that her concessions 
would not have been made in vain if China should come to appreciate 
the sincerity of her desire to promote the happiest relations betAveen 
the tAvo neighboring nations in the Far East. The Japanese plan 
Avas really more than a compromise. If the whole situation was made 
clear to the Chinese people, he was sure that they would be able to 
appreciate the spirit in which the concessions Avere made by Japan. 

Dr. Koo said that that spirit was well appreciated, but there 
was another aspect relating to the question of haA'ing a Japanese 
national as traffic manager. As he understood, the Avork of a traffic 
manager was of such nature as Avas bound to have a great deal to do 
Avith the shippers. This Shantung line ran through the greater 
part of the Shantung ProA'ince AA'hich Avas most densely populated. 
In the nature of things, the traffic manager w^ould liaA^e a great deal 
to do with the Chinese people — many times more than with Japanese. 
The function of the chief engineer, on the other hand, was only 
technical. Between these two posts the Chinese delegation pro- 
posed to emploA^ a Japanese national as engineer. He thought that 
arrangement Avould really go to serve the purpose of promoting 
friendly relations between the two peoples. He really felt that in 
the interest of friendly relationship and cooperation betAveen Japan 
and China, it would be more adA^isable to giA^e the post of engineer 
instead of traffic manager to a Japanese national. There was no 
question of prejudice on China's part, but in order to eliminate the 
possible cause of misunderstanding, he hoped the Chinese proposal 
would be accejDted. He Avould be glad if, after three or four daj^s' 
discussion, it could be said that they had practically approached an 
agreement. 

Baron Shidehara said that the Japanese traffic manager would be 
placed under the control and supervision of the Chinese general 



• . 155 

manager. His position in the whole system would be only of a sub- 
sidiary nature. He did not think much misgivinc; would be created 
if the entire situation were made known to the Chinese people. He 
had said that there were' various technical difficulties on Japan's 
part in regard to the question of accepting treasury notes. He was 
really afraid that the Japanese people might raise objection to their 
Government accepting treasury notes. Only in their anxiety early 
to obtain a satisfactory settlement of the whole cjuestion, he and his 
colleagues had taken the whole responsibility upon themselves with 
regard to the question of treasury notes. Thus it was an important 
concession on the Japanese side. Also, in regard to the question of 
period, the Japanese delegation had gone very far to meet the Chinese 
wishes. Regarding the whole matter together, he hoped that the 
proposed solution would not be considered very unreasonable on 
Japan's part. 

Dr. Koo said he hoped the Japanese delegation would accept the 
Chinese plan as a contribution to the cause of friendly relationship 
between the two nations. He felt sure that this difference on the 
question of expert assistance was not going to stand in the vray of 
reaching an agreement on the whole question of the railway, upon 
which so much time had been spent. 

Baron Shidehara said it would not be possible for the Chinese 
delegation to explain to their Government and people that this was 
their last compromise plan, and that the arrangement, moreover, was 
to last only for a short period of time. 

Dr. Koo said that, if they could, he and his colleagues would very 
gladly accept the Japanese plan, only the pressure upon them from 
the Chinese people was so great. Especially the people of the 
Shantung Province had sent to Washington their representatives, 
who seemed to take pleasure in insisting upon seeing the Chinese 
delegates on this question several times ever^^ da3^ He hoped that 
the Japanese delegates would not insist upon having a Japanese 
traffic manager, but would be satisfied only with a Japanese en- 
gineer. 

Baron Shidehara hoped that his Chinese friends Avould realize 
the position of the Japanese delegation. If no satisfaction could 
be given them on this question of traffic manager, personally he 
could not extend much hope that he and his colleagues might be 
able to persuade the Japanese Government to accept Chinese treas- 
ury notes for the payment. Here, Baron Shidehara desired, for 
his own information, to obtain a more exact idea of the original 
Chinese plan of cash paj^ment. He wanted to know when, under 
that plan, the paj-ment would be effected; if it Avas to take place 
immediately upon conclusion of the proposed agreement. 

Dr. Koo said that the Chinese intention was to pay off by one in- 
stallment. The payment would be completed within nine months 
after the conclusion of the agreement; that was to say, on the day 
when the transfer of the railway was to be completed. 

Baron Shidehara hoped that it might be clearly understood that 
the three points enumerated in his proposal were mutually inter- 
dependentupon each other, so that the questions of treasury notes and 
of the period of payment would not be considered as determined so 
long as the question of enlisting Japanese* expert service was left 



156 

iindecidecl. Unless met halfway in reoard to the third question, 
the Japanese delegation could not recommend the whole scheme to 
their Government for approval. That was the Japanese position. 
If the question of the appointment of a traffic manager Avas not ac- 
cepted, it seemed to him that the only thing to be done was to re- 
consider the whole matter. 

Dr. Koo said that the difference between the engineer and the 
traffic manager was very grave to China, but to Japan it was rather 
a small matter. Therefore, he hoped that this difference Avould not 
be allowed to stand in the way of their reaching an agreement on 
the whole question of the railway. 

Baron Shidehara said that the question of traffic manager was 
of great importance to Japan. At least it was of equally great im- 
portance to Japan as to China, What Japan had in mind Avas to 
secure good, efficient service for the whole line, and the Japanese 
delegation would lecommend to their Government to select an able 
and efficient person. Moreover, he was not asking for the principal 
l^ost, but only for a subordinate post. The reasonableness of the 
Japanese wish was not, perhaps, fully appreciated by the Chinese 
delegation. They, perhaps, did not realize what great difficulty 
the Jaj)anese delegates had had in agreeing to accept treasury bills. 
The;re was rgally great difficulty in that respect, but in the interest 
of a speedy solution of the matter, Mr. Hanihara and himself had 
come to the conclusion that they had to take upon themselves the 
whole responsibility in recommending the plan to the Japanese 
Government. Personally he could not extend much hope even on that 
point. As for the Chinese plan proposed that clay, it was clearly 
impossible for Tokyo to accept. 

Dr. Koo said that if the Japanese delegation saw their way to 
accept the plan as they had discussed that day, he felt certain that 
his Japanese friends would be able to persuade their Government 
to approve it. If payment by treasury notes should cause much 
difficulty to the Japanese Government he would leave it to the Jap- 
anese delegation to suggest to Tokj^o, at the same time, that the 
plan of cash payment would be available. He merely threw that 
out as a suggestion to the delegation, without intimating any in- 
tention to revert to the original plan. If it was realized how de- 
sirable the Chinese plan would be in preventing misgivings on the 
part of the Chinese people in general, and of the people of the Shan- 
tung Province in particular, he felt almost certain that the Jap- 
anese delegation would find no difficulty in convincing their Gov- 
ernment of the wisdom of that plan. 

Baron Shidehara said that he desired to make clear to himself 
what his Chinese friends had suggested about the chief accountant. 
He desired to knoAv if they were ready to say that a Japanese chief 
accountant would be emploj^ed in the Shantung Railway section. 

Dr. Sze answered in the negatiA'^e. He was making the suggestion 
he had made without consulting the parties interested in the other 
railway. Although, perhaps, a matter of formality, it was proper 
that they should be consulted first. The Tientsin-Pukow Railway 
was used for the purpose of security of the Peking-Hankow Rail- 
way. There had been concluded two loans in 1908 and 1910, which 
were secured on the revenue of this raihvay. The quotations for 



157 

those loans in London were highest among the loans floated about 
the same time. As a measure of precaution the Chinese Government 
would naturally be obliged to suggest to the Tientsin-Pukow Rail- 
way that their books be kept separately. It was a matter of more 
or less technicality. In Chinese railways the books were kept 
separately for each section and even for each train. 

Baron Shidehara asked if this separate keeping of books was men- 
tioned as a concession on China's part. 

Dr. Sze said it had not been suggested as a concession. 
Baron Shidehara said that the whole thing amounted to this: 
That in regard to the three propositions made by the Japanese dele- 
gation, the Chinese delegation had made a concession regarding the 
period of payment to the extent of making the term of the payment 
and the period of extra redemption 10 and 3 years, respectively, and 
that regarding the third proposition only the appointment of a dis- 
trict chief engineer had been agreed to. 

Dr. Sze said that, seeing that on the southern branch of the Tient- 
sin-Pukow Railway a foreign chief engineer was employed, it would 
be easier to explain to the Chinese people if only a Japanese chief 
engineer would be employed on the Shantung Railway. 

Baron Shidehara said that the fact remained that the Chinese 
delegation had not gone far to meet the Japanese wishes. He had 
no idea to make bargains on those points. The three points suggested 
were the limit of concessions which he and his colleagues could 
reasonably expect Tokio to accept. Since the Chinese delegation re- 
fused to accept the enlistment of Japanese expert service, there was 
nothing to do but to reconsider the whole matter. 

Dr. Koo said that in regard to the question of period the Chinese 
delegation had really made great concessions. They had first pro- 
posed cash payment; later, had modified that plan, and suggested 
the three-year payment ; and then, that being found by the Japanese 
delegation still unsatisfactory, they had proposed 10 years for liqui- 
dation, with a three-year period of option. As a further step they 
had agreed to a 12-year period. Therefore, he hoped that in regard 
to the question of expert assistance, those concessions would be taken 
into consideration. 

Baron Shidehara said that with regard to the question of period, 
the period of time for the whole outstanding liability — the duration 
in which the payment should be completed — was not of much im- 
portance to China. What was important to China was the period 
after the expiration of which China could exercise her option to 
redeem the whole liability. The Chinese delegation had not yielded 
at all on that very material point. 

Dr. Koo said that if it would in any way facilitate the Japanese 
delegation in making their recommendations to their Government, 
the Chinese delegation would be prepared to make a statement to the 
effect that six months' notice would be given to Japan to pay off all 
the outstanding amount at the expiration of three years after the 
agreement. Put in that form, the period of redemption would be in 
effect three years and a half. 

Baron Shidehara asked if the idea was that at the end of three 
years China should give notice for the redemption of the whole 
liability. 

93042—22 11 



158 

Dr. Sze said that it did not necessarily mean that. The idea was 
that by means of wording Japan shoukl be given an extra half year 
without arousing suspicion in the minds of the Chinese. 

Mr. Hanihara desired to say a few words. As he had listened to 
the conversation, there seemed to exist a misunderstanding on the 
part of the Chinese delegation as to the point on which the Japanese 
delegates placed the greatest importance. It was the question of 
expert assistance, of the traffic manager which Japan considered as of 
the greatest importance. If, unfortunately, no satisfaction could 
be- given them on this point, it would be difficult for the Japanese 
delegation to consider the other points. The question of period did 
not in itself amount to much so long as no satisfaction was given in 
regard to the enlistment of Japanese expert assistance. He really 
hoped his Chinese friends would find it possible to give further con- 
sideration to that matter. If he might be permitted frankly to state 
his personal views, he was afraid that even if that point were ac- 
cepted, it would be difficult for the Japanese Government to accept 
the whole plan. That was, however, only his personal impression, 
and, of course, he and his colleagues would do their best to persuade 
their Government. 

Baron Shidehara said that in regard to the question of the traffic 
manager he believed the Japanese position was made sufficiently 
clear to the Chinese delegation. In the first place, the employment 
of the traffic manager Avould be only for a short period. In the sec- 
ond place, Japan was not asking any principal post but only a sub- 
ordinate one for her national. 

Mr. Hanihara said the Japanese traffic manager would be placed 
under the supervision of the Chinese general manager. 

Baron Shidehara said that, moreover, he and his colleagues felt 
certain that the plan would not by any means interfere with the 
plan of unification of China's railways. 

Dr. Koo said that for the past few days the Chinese delegation had 
been entirely animated by their desire to meet Japan's wish to re- 
tain a certain interest in the raihvay. It was their honest desire to 
give Japan an interest in the railway, as far as was consistent with 
China's aspirations to take back the railway and free it from all 
foreign influence. 

Baron Shidehara reminded Dr. Koo that the original plan was 
for Japan to have an interest in the railway of the same nature and 
to the same extent as other nationals had in other Chinese railways. 
From that original plan, they had conceded to the extent of their 
present proposal. They had agreed that the period of payment 
should be limited to a very short space of time. They had consented 
to give up the employment of the Japanese chief engineer. The Japa- 
nese delegates, for their part, had certainly done their best to me^t 
the Chinese wishes. It would not be at all unfair to say that they 
had made greater concessions than their Chinese colleagues. It was 
unfortunate that after so many days they still were unable to adjust 
this question. If, however, it was impossible for the Chinese delega- 
tion to accept their plan, the only way would be to adjourn until 
the following day, so that both sides might think the matter over. 
The Japanese delegation had already shown their sincerity of desire 
to meet the Chinese point as far as possible. 



159 

Dr. Sze said that he and his colleagues had for their part tried all 
that was possible ; had "explored all possible avenues " to meet the 
Japanese wishes. 

Mr. Hanihara said that if the matter of enlisting Japanese as- 
sistance in the service of the Shantung Eailway could not be accepted, 
the whole plan would have to fall through. In that case, the position 
of the Chinese delegation would stand at cash payment, and that of 
the Japanese delegation at the plan of railway loan contract. 

The press communique was issued (Annex I) and an adjournment 
was taken at 5.40 p. m. until 3 p. m. Tuesday, December 20,, 1921. 

Washington, D. C, Deceinber 19^ 1921. 

SJC-16 :] 

Annex I. 

December 19, 1921. 
[For the press.] 

Issued hy the Chinese and Japanese delegations. 

The sixteenth meeting of the Chinese and Japanese delegates rela- 
tive to the question of Shantung took place in the governing board 
room of the Pan American Union Building to-day. The discussion 
centered around the proposal from the Japanese delegation to have 
certain offices in the administration of the Tsingtao-Tsinanfu Rail- 
way filled up by Japanese nationals. The meeting adjourned at 
5.30 p. m. until 3 o'clock to-morrow afternoon. 



SEVENTEENTH MEETING. 

The seventeenth meeting, held in governing board room, the Pan 
American Union Building, Washington, D, C, at 3 o'clock in the 
afternoon of Tuesday, December 20, 1921. 

PRESENT. 

China.^-Dr. Sao-Ke Alfred Sze, Dr. V. K. Wellington Koo, Dr. 
Chung Hui Wang. Secretaries : Mr. T. C. Yen, Mr. T. Y. Tsai, Mr. 
T. F. Hsu, Mr. C. H. Zee, Mr. Chuan Chao, Mr. T. H. Koo. 

Japan. — Baron K. Shidehara, Mr. M. Hanihara, Mr. K. Debuchi, 
Secretaries: Mr. S. Saburi, Mr. E. Kimura, Mr. H. Saito, Mr. T. 
Shiratori. 

Also present as observers : 

The United States of A7?ierica. — Mr. John Van A. MacMurray, 
Mr. Edward Bell. 

The British Empire. — The Right Hon. Sir John Jordan, G. C. 
I. E., K. C. B., G. C. M. G. ; Mr. M. W. Lampson, M. V. O. 

RAILWAY. 

Dr. Sze said that since the two delegations had met yesterday 
the Chinese delegates had further given careful consideration to 
point 3 of the Japanese proposition; namely, the question of the 



160 

enlisting of a Japanese assistant traffic manager in the service of the 
Shantung E ail way. While it was true that the period of the service 
would be very short, and while the Chinese delegates sincerely 
wished to meet the Japanese wishes, he regretted to say that after 
consultation with the Chinese people here, the Chinese delegation 
had found it impossible to comply with the Japanese wishes. There- 
fore, he and his colleagues hoped that the Japanese delegates might 
be able to meet the desire of the Chinese delegation. The reason for 
the position of the Chinese delegates was not because of their lack of 
desire to meet their Japanese friends. In point of fact, he and his 
colleagues had told the Chinese people that the period was so ver}^ 
short that they might reconsider their attitude, but they could not 
carry their motion in the delegation. It was therefore by no means 
lack of desire on their part but " lack of opportunity " that con- 
strained them now to take the present standpoint. 

Baron Shidehara said that he had nothing definite to suggest, but 
he remembered that Dr. Koo had pointed out yesterday that the; 
traffic manager had much to do with the shippers and that the greater 
part of those shippers would be Chinese people. It had just occurred 
to him whether it would not be possible for the Chinese delegates 
to agree to the arrangement that China would appoint her own 
manager and also a Japanese expert as an associate manager, and 
the Japanese expert might cooperate with the Chinese manager, both 
of them being under the general control of the Chinese traffic man- 
ager for the whole system, which would consist of the Tientsin- 
Pukow and the Shantung Railways. And in the same way a Japa- 
nese accountant could be appointed to cooperate with the Chinese 
accountant. 

Dr. Sze said that he was afraid that it would be difficult. In the 
northern section of the Tientsin-Pukow Railway, where the Shan- 
tung Railway would be connected, the officials were entirely Chinese; 
only in the southern section was there a British engineer employed. 
Therefore he was afraid that it would be very difficult for the Chi- 
nese delegates to propose the system suggested by Baron Shidehara. 

Baron Shidehara said that what Dr. Sze had just said came to this : 
That the Chinese delegates could not commit themselves to the 
appointment of any Japanese experts for the Shantung Railway 
except in the case of the district engineer. 

Dr. Sze said that that arrangement would be easier for the Chinese 
delegates to explain to the Chinese people. 

Baron Shidehara said that he would like to ask an entirely differ- 
ent question. After all, he understood that the Chinese delegates 
preferred the plan of cash payment, and they had stated yesterday 
that the cash payment, according to the Chinese plan, was to be 
effected at the end of nine months from the date of the agreement; 
that was, at the same time as the transfer of the railway properties 
was to the completed. He would now ask the Chinese delegates 
whether it would not be possible for them to agree to an arrangement 
under which the Chinese Government would immediately or before 
the commencement of the transfer of the railway, deposit the total 
amount of the payment with a bank of a third power in China, the 
money so deposited to be handed over to Japan, when the transfer 
was completed. 



161 

Dr. Sze said that the obvious difficulty of that arrangement was 
this, that just at this moment the market rate of money was so high. 
China was keeping the new year under the old calendar, and the rate 
of interest was generally very high before the new year. The rate 
would stand at 10 or 15 per cent. If money was deposited with a 
foreign bank now, it would yield only 2 or 3 per cent, or at the highest, 
5 per cent. It was again a question of profit. Although the period 
was short, the arrangement might mean a great financial loss, seeing 
that a big sum of money was involved. 

Baron Shiclehara remarked that any interest on the money deposited 
would accrue to China. 

Dr. Sze said that the money deposited could not be used for nine 
months. It would yield only from 3 to 5 per cent interest, while if 
the bankers used the money themselves, they could secure from 10 to 
12 per cent of interest. Then, again, it would be much easier for the 
Chinese bankers to secure the money at several different periods than 
all at once. Thej^ would be able to call in their loans without specially 
affecting the market. If they were to be called in all at once tremen- 
dous effect would be felt in the whole financial market of China. There 
were, therefore, practical difficulties apart from the question of inter- 
est rates. 

Baron Shidehara said that what he had in mind was this: The 
Chinese delegates had suggested a period of nine months. At a time 
close to this period practically the greater part of the railway would 
have been transferred to China, leaving only a very small portion. 
Should it happen that when only a small piece of railway property 
was left the cash paj^ment could not be effected, Japan would be placed 
in a very awkward position. It was therefore proposed that when the 
transfer began the Chinese Government should deposit in the bank 
of a third power the whole amount of the payment, so that at the 
expiration of nine months it could be handed over to Japan. 

Dr. Sze said that the Japanese delegates appeared to desire that 
China should make a deposit before the completion of the transfer. 
He thought that some arrangement might be found which would 
accomplish that purpose without bringing about the difficulties men- 
tioned before. 

Baron Shidehara said he was not aware of the technical side of the 
question ; but in perhaps six months the transfer of the railway prop- 
erties would have been completed. It would be embarrassing if the 
money was not forthcoming then. 

Dr. Sze inquired whether it was Baron Shidehara's idea that the 
sum of money should be deposited, so that as soon as the transfer was 
completed the money should be immediately available. He wondered 
whether it was necessary to make that deposit before the transfer was 
started. 

Baron Shidehara replied that it was necessary. It might so happen 
that the transfer would be partially made, and the Chinese bankers 
declare that they had no money. 

Dr. Sze said there was one practical difficulty about the Japanese 
proposal. On the date of transfer, neither the Chinese Govern- 
ment nor the Japanese Government could exactly know what would 
be the amount to be paid by China. The improvements and addi- 
tions made to the Shantung Railway under Japanese occupation 



162 

would not yet be made known. What would be definite at that time 
would only be so many gold marks. 

Baron Shidehara said that, practically speaking, the transfer 
would not begin before the joint commission had completed its task 
of valuation. 

Dr. Sze said that he fully appreciated the point of view of Baron 
Shidehara, and he thought he should be able to find a way by 
which he could meet the Japanese wishes and at the same time avoid 
giving serious loss to the Cliinese bankers and any bad effect on the 
mone}^ market. Suppose on the day the commission finished its 
work of assessment and decided upon what properties should be 
transferred and what sum China should pay, and a certain sum of 
money — not the whole amount to be paid, but a certain portion of 
it — were to be deposited with a bank of a third power. The Chinese 
banks would not have ready cash to meet the whole payment, and 
in any case it would not be advisable that so large an amount of cash 
should be taken out of the market. However, if the plan of a gradual 
deposit was adopted, the stringency on the money market would be 
less severe. Suppose the joint commission could finish its work in 
three months and decide that so much should be deposited at once, 
and the remaining sum to J3e deposited at certain intervals accord- 
ing to the progress of the transfer of railway property. That would 
at once meet the Japanese point of view and also not place undue 
stringency on the money market. 

Mr. Hanihara desired to ask if the proposal just made by Dr. Sze 
amounted to this: Suppose the joint commission was appointed and 
the Avork of valuation Avas finished in two or three months. Then be- 
fore the actual transfer of the railway properties began a certain 
sum, instead of the entire amount at once, would be deposited. He 
wanted to know whether the Chinese idea was that the deposit should 
be divided according to the amount of properties handed over. 

Dr. Sze said the transfer had to be gradual in order to be fair to 
both sides and to secure the smooth working of the railway. He de- 
sired to be given more time to think out a proper way, 

Mr. Hanihara said that if the actual transfer of the railway prop- 
erties was started, and a certain part of them was actually trans- 
ferred, it would be very difficult to discontinue the transfer of the re- 
maining part. Therefore, it was most desirable that there should be 
some assurance that the payment would be carried out by the Chinese 
Government. 

Dr. Sze said that the argument advanced by Mr. Hanihara had 
convinced him that his suggestion was not entirely satisfactory. If 
he could be given a few moments, he would try to work out some 
plan which might be agreeable to his Japanese friends. 

After some consultation with his colleagues. Dr. Sze, continuing, 
said that the transfer was one thing and the payment was another. 
Suppose they divided the payment into three periods and at the end 
of three months from the date of the agreement two-fifths of the 
whole amount should be deposited, one-fifth at the end of six months, 
and the remaining two-fifths at the end of nine months. This plan 
would meet the Japanese purpose without serious effect upon the 
money market. 



163 

Baron Shidehara said that it seemed to him that the new plan 
would have the same difficulty as he had anticipated at first. When 
the first deposit was made, there would be no knowing whether the 
Chinese bankers would make the remaining deposits. There would 
be no assurance that the three-fifths of the whole amount would be 
punctually and regularly deposited in due course of time. Thus the 
same difficulty remained under the suggested plan. 

Dr. Sze said that if the whole amount was to be paid at once there 
were difficulties on China's part, as he had stated. First, the loss of 
interest would be great, and, secondly, if a large amount of money 
was suddenly taken out of the market, it would have a serious effect 
upon the money market. However, in order to meet the Japanese 
wi^es, he had proposed the deposit of two-fifths of the whole amount 
as soon as the assessment was taken. 

Baron Shidehara said, as to the first point, he thought it was evi- 
dent that the Chinese Government should have to bear the difference 
between the current rate of interest and the rate on the deposit. As to 
the second point, according to the original Chinese plan of cash pay- 
ment, the whole amount would have to be paid at the end of nine 
months. A large amount of cash would have to be suddenly with- 
drawn from the market anyhow. 

Dr. Sze said that if the amount was to be paid in nine months, the 
Chinese bankers could call in their loans gradually. If they had nine 
months in which to obtain the required sum they could so manipulate 
their operations as to spread the effect of the drive on merchants over 
the entire period. The duration of nine months would make a great 
difference to the market. 

Mr. Hanihara wondered where would be the guaranty that the 
money would be paid regularly and punctually. 

Dr. Sze said that last Sunday lie had seen two Chinese bankers. 
They told him that they could not put up the money for the pay- 
ment before the Chinese New Year, but that after January 15 there 
would be plenty of cash in China waiting for investment, so that 
they could easily raise money. The bankers said that they would 
be able to. fulfill the arrangement of cash pajmient. Therefore he 
could safely assure Mr. Hanihara that the payment would be made. 

Mr. Hanihara, referring to the Chinese proposal to deposit in 
three installments of two-fifths, one-fifth, and two-fifths, said that 
the point he desired to make was that after the first deposit was 
made, there would be no guaranty for the deposit of the remaining 
three-fifths. Even in ordinary business transactions some sort of a 
guaranty would be needed in such a case. 

Dr. Sze pointed out that a large number of Japanese merchants 
were doing business in China, and that it was not their practice to 
make or demand advance payment in their transactions. He thought 
in the present case the Chinese bankers could be safely depended 
upon. 

Mr. Hanihara said that the transfer of the railway was not to be 
likened to the purchase of a few bales of cotton. 

Dr. Sze remarked that, for illustration, when 10 bales of cotton 
were bought by the Japanese merchant, the payment would be made 
by installments — so much to be paid at the time of signing the con- 
tract, another amount at the time of shipment, and the remaining 
sum when the consignment reached Japan, and so forth. 



164 

Mr. Hanihara said that that depended upon the degree of credit 
people possessed. In the case of the railway transfer, he thought 
that there should be offered some guaranty, some collateral, by the 
Chinese Government. 

Dr. Sze said that he was sure that the Chinese bankers would be 
ready to give assurances. 

Mr. Hanihara said that he was not dealing with Chinese bankers. 

Dr. Sze inquired of Mr. Hanihara whether the Japanese delegates 
desired to have some collateral. 

Mr. Hanihara said that the}^ wanted something of that nature. He 
meant some security, in case the amount of money could not be paid. 

Dr. Koo inquired W'hat was in the mind of the Japanese delegates 
in asldng for security. 

Mr. Hanihara said that the only way seemed to be to put up the 
money in a bank, as suggested, at the time the transfer of the rail- 
way properties commenced. 

Dr. Koo asked whether the Japanese delegates meant that the 
whole amount should be deposited: and if so, when. 

Baron Shidehara said if Japan Avere to receive cash payment, it 
would be important to have an assurance that the entire amount 
would be deposited after the joint commission should have com- 
pleted its work and before the transfer of the railway properties 
should actually begin- 

Dr. Koo said that it seemed to him that undertakings of that 
description ought to be bilateral, the basis being mutual confidence. 
Speaking of guaranty, it might be asked by China with equal perti- 
nence what assurance there would be that after making deposit of 
the money the transfer w^ould be made to her satisfaction. Inas- 
much as the Chinese proposal was to proceed depositing money 
along with the progress of the transfer of the railway properties, 
namely, tliat the deposit and transfer should be made pari passu, it 
would seem to him that the Japanese proposal to have the whole 
amount deposited at once was rather exacting. 

Baron Shidehara said that he did not like to repeat such an 
unpleasant incident, but the Yokohama Specie Bank and other 
Japanese financiers had been placed in an awkward position vis-a-vis 
their clients, on account of the default on China's part to pay interest 
on their loan. In that situation, it would appear to him that the 
Japanese request for a definite security was not unreasonable. The 
plan of depositing the whole amount was the only plan he could 
think of to assure regular payment. 

Dr. Koo said that he was not sure if the Japanese delegates, in 
demanding the deposit of the whole amount, were not unnecessarily 
blending the questions of transfer and deposit. As the Chinese offer 
now stood, in three months two-fifths of the whole amount would 
be deposited with the bank of some third power and that fact would 
be known to Japan and ought to be a sufficient guaranty. 

Baron Shidehara answered that he had stated that so far as the 
two-fifths of the paj^ment was concerned, that arrangement would 
be satisfactory, but there would be no guaranty whatever for the 
rest of the amount to be regularly deposited. 

Dr. Koo wondered whether Baron Shidehara meant to say that 
the transfer would be completed within three months. 



165 

Baron Shidehara said that suppose the joint commission finished 
its work within three months, then they could proceed to the trans- 
fer of the railway properties. But before the transfer actually be- 
gan the Japanese Government would like to be assured that when 
the transfer was completed money would be promptly paid. That 
was important if Japan were to agree to the plan of cash payment, 
for it was possible that after transfer had actually begun there might 
occur a monetary crisis in China, and that the bankers might find it 
impossible to carry out their contract. Then the Chinese Govern- 
ment would not be able to make the payment to the Japanese Gov- 
ernment. Such incidents had actually taken place in the past. 

Dr. Sze said that during the last few years the general situation 
was in no country normal, but that that had not destroyed all sense 
of credit. 

Baron Shidehara said that he had no intention of making any 
disparaging remarks against the Chinese Government, but as a re- 
sult of China's failure to pay interest on her loan, the Japanese 
bankers were actually placed in an awkward position in their rela- 
tion to the bondholders. If such a thing should arise in relation to 
the payment for the railway properties, the Japanese Government 
itself would be placed in an impossible position. In principle, he 
was not criticizing the suggestion that the whole payment should be 
made on the completion of the transfer. He would like to be assured, 
however, that before the process of transfer was actually commenced 
some definite assurance should be given that the money would be 
paid regularly. 

Dr. Koo said that the Chinese delegation had suggested making 
separate deposits. That ought to be in itself a guaranty. It was 
not likely that the work of the joint commission would be finished 
in less than three months; the transfer would begin only after that 
duration. By that time the deposit of two-fifths of the amount 
would have been made. Before two-fifths of the properties had been 
transferred, perhaps the time would be ripe for China to make the 
second deposit, and so on to the end. Therefore, he could not quite 
understand what was in the minds of the Japanese delegation. 

Baron Shidehara said that perhaps he had not as yet made his 
position clear to the Chinese delegates. Perhaps " assurance " was 
not a proper term to use. What he had in mind was this : Suppose 
the time for the second deposit should come and find China in a 
monetary crisis. Then what would happen to Japan? Could Japan 
ask China to hand back such portions of the properties as had 
already been transferred ? 

Dr. Koo asked what, if he could repeat the same question, was 
in the mind of Baron Shidehara. 

Baron Shidehara said that what he had in his mind was that the 
entire amount should be deposited after the joint commission had 
completed its work and before the transfer would actually begin. 

Dr. Sze said if Baron Shidehara meant that the transfer would 
only be started after the joint commission had completed its work, 
then it would follow that if the commission disagreed the transfer 
would be indefinitely deferred. 

Baron Shidehaf-a said that if the joint commission could not 
finish its work the transfer would naturally be deferred. There 



166 

would be no knowing what properties China would be willing to take 
over, but in the ordinary course of things, he counted upon the com- 
mission to finish its work in three months. And then the actual trans- 
fer could be effected in about five or six months. 

Dr. Koo said that if the total amount w^as to be deposited at the 
outset, China would incur a great loss on the interest of the money. 

Baron Shidehara said he thought that that would be inevitable. 
However, the amount would not be very large. The period could not 
be longer than half a year. 

Dr. 8ze said that it might amount to something like a million and 
a half dollars. The difference between the current rate of interest in 
the Chinese money market and that of the bank of the third power 
would be approximately 10 per cent. 

Baron Shidehara said it could not be helped. At any rate, the 
Chinese proposition would come to this, that Japan had to hand over 
the railroad properties without any guaranty that the payment would 
be effected in due course. However, if, unhappily, a monetary crisis 
should happen in China, Japan would have to hand over the railway 
properties, while the paj^ment would be deferred indefinitely. 

Dr. Sze said that while Chinese bankers had assured him that the 
w^hole amount could be raised in three months after January 15, he 
supposed there would have to be hard drives for the money. He 
would at any rate submit the whole matter to the Chinese bankers. 

Baron Shidehara reminded the Chinese delegates that the period 
of nine months was suggested only tentatively. He had to consult 
technical experts before he could say anything definite. That point 
had not been definitely decided. If necessary, it would have to be 
made 10 or 12 months. 

Dr. Koo said that China wanted the period to be as short as pos- 
sible. 

Mr. Hanihara said that if Japan were to agree to the plan of cash 
payment, the sooner would be the better. It would be very unneces- 
sarj^ to repeat what Baron Shidehara had said, but what the Japanese 
delegates desired was elucidation of the Chinese proposal. It was 
far from their intention to intimate that they might accept the pro- 
posal ; they onh^ desired exact information in case they might have to 
consider the eventuality of cash payment. He hoped there would be 
no misunderstanding on the part of the Chinese delegates. 

Baron Shidehara said that a difficult stage in their negotiations 
had been reached and he thought that it would be useful to re- 
capitulate the whole situation with regard to the railway question. 
He had prepared a resume of what had taken place between the two 
delegations. Baron Shidehara here read the following statement : 

" The Japanese Government originally proposed a plan of joint 
enterprise. They have not yet withdrawn that proposal. But the 
Japanese delegation, being anxious to meet the wishes of the Chinese 
delegation, expressed readiness to recommend to Tokyo, as a sub- 
stitute of the joint enterprise plan, a plan of railway loan agreement 
to be concluded between the Chinese Government and Japanese 
capitalists, on the basis of the terms contained in railway loan agree- 
ments of comparatively recent dates which Chin^ has entered into 
with various foreign capitalists. 

" The Chinese delegation found itself unable to accept this new 
proposal and suggested the following two alternative plans: 



167 

" 1. Plan of the immediate payment in cash of the entire amount 
•of China's liabilities regarding the Shantung Railway properties. 

" 2. Plan of effecting the payment in question on the following 
terms : 

" (a) The total amount to be paid in several installments extend- 
ing for 12 years," China reserving to herself the option of paying 
her whole remaining installments at once, upon six months' previous 
notice, after a period of three years from the date of the agreement. 

" (6) The first installment to be paid on the day on which the 
transfer of the properties is to be completed, and the remaining in- 
stallments to be paid in treasury notes secured on the revenues of 
such properties and bearing interest at per cent. 

" (c) China to enlist in the service of the Tsingtao-Tsinanfu Rail- 
way a district engineer to be recommended by Japan. 

" This is the substance of the two alternative plans of adjustment 
proposed by China. The Chinese delegation* expressed preference 
of the first plan of cash payment to the second plan of the payment 
in treasury notes. In either case, it is understood, as has been re- 
peatedly declared by the Chinese delegation, that China has no inten- 
tion of raising in any foreign market any portion of the fund 
required for the payment in question." 

Baron Shidehara, continuing, said that the Japanese delegation 
sincerely regretted that their proposition, which they believed was 
a very modest one, was not found acceptable to the Chinese delega- 
tion, and that he and his colleagues were not at liberty to agree to 
recommend to their Government the Chinese proposal contained in 
either of the above two alternative plans as they stood at present. 
It seemed that the two Governments must now find a means of ad- [ 
justment in regard to the railway question. It only remained for I 
the Japanese delegation to report to Tokyo all that had taken place 
at this meeting and to obtain instructions before proceeding with 
further discussion on this question. 

Dr. Koo said that his colleagues and he had listened with great 
attention to the statement Baron Shidehara had made and of which 
a written copy had been given him. He need hardly conceal his 
feelings of regret that after having so fully exchanged their views, 
after so many meetings, the Japanese delegation should feel con- 
strained to regard the situation before them as they did. It ap- 
peared to the Chinese delegation that understanding had been reached 
on nearly every main point involved in the Shantung question. 
With the permission of the Japanese delegation he would like to 
summarize the situation as follows: 

In the first place, in regard to the question of the transfer of the 
railway property, they had arrived at an understanding after the 
Japanese proposition to prolong the period from three to nine months 
had been accepted. Then, on the question of valuation of the 
railway properties, in order to meet the Japanese wishes the Chinese 
delegates had relinquished their position in regard to profits on the 
railway during the Japanese administration, as well as in regard to 
the question of Chinese shares. Again, the Chinese delegation had 
gone out of their way to meet the Japanese viewpoint regarding the 
question of improvements upon and additions to the railway prop- 
erties. With those concessions on China's part an understanding had 



168 

been reached on the question of valuation. Then, again, with re- 
gard to the question of the joint commission, China had proposed 
the provision of arbitration in order that any differences that might 
arise in connection with the transfer and valuation of the railway 
properties might be speedily settled. It was to meet the Japanese 
desire that the Chinese delegation had accepted the plan of eventual 
recourse to diplomacy with such expert assistance from a third 
power as might be agreed upon. 

With these three main questions disposed of there had been left 
only one question — the mode of payment. On that question the 
Chinese delegation had originally proposed cash payment, as had 
been truly stated by Baron Shidehara, but, in order to meet the 
earnest desire of the Japanese delegation to retain interest in this 
railway line, the Chinese delegation had suggested a three-year 
period of payment, and had proposed to pay for the railway prop- 
erties with treasury notes secured upon the revenues of the railway. 
That security had been offered again to satisfy the Japanese desire 
to have suitable security for the unpaid installment. As the three- 
year period had appeared to be too short, the Chinese delegation 
agreed to prolong the period of deferred payment to 10 years and 
later to 12 years. As the Chinese delegation understood, the Jap- 
anese delegates had been good enough the day before to say that if 
the question of personnel should he adjusted in a manner satis- 
factor}^ to them they would be ready to accept the proposed period 
and the payment bj' means of treasury notes. As to the question of 
personnel, the Japanese delegation had proposed three positions. 
In order not to let a subordinate point stand in the way of the 
settlement of the whole railway question, the Chinese delegation had 
offered to appoint a Japanese national as district engineer for the 
whole Shantung line, and they had also stated that it was their in- 
tention to recommend to the Chinese Government that such district 
engineer should be selected from among Japanese experts well ex- 
perienced in the Chinese railway service. To avoid misunderstand- 
ing, it might be added that, as had been stated at the last meeting, it 
was considered more advisable that the mode of selection and ap- 
pointment of such expert should be left to China, rather than to be 
recommended by Japan, for the very obvious reason that the Chinese 
Government should avail itself of such an expert as was already 
enlisted in the service of the Chinese. He had been given to under- 
stand that day that the Japanese delegation would suggest the ap- 
pointment of a Japanese associate traffic manager side by side with 
a Chinese associate traffic manager, both to be under a Chinese gen- 
eral manager. The Chinese delegation, however, had said that they 
could not meet the Japanese view on that point. (Here Dr. Koo 
interrupted himself by saying that he had just been reminded by his 
colleague that it was not the Japanese intention that the Chinese 
should pay for all railway properties, but only for such as might 
be agreed upon. Baron Shidehara agreed.) 

Continuing, Dr. Koo said he had been going to state that the dif- 
ference of views on the mode of payment appeared to him to be very 
small ; namely, the difference between the traffic manager on one side 
and the chief engineer on the other. Then, the question of cash pay- 
ment had again been discussed that day, and in order to show their 
good faith and to assure the Japanese delegation of their earnest de- 



169 

sire to meet the Japanese point, the Chinese delegation had offered 
to effect such payment through making deposits every three months. 
It therefore appeared that on either of the alternative plans the out- 
standing difference was very small. In view of this fact, he and his 
colleagues felt it somewhat difficult to understand the position that 
the Japanese delegation were taking on this railway question. The 
Japanese delegation naturally desired to consult their Government, 
but if by that it was meant that they would revert to their original 
position in regard to the three other main points — that was to say, 
first, the transfer of the railway properties; second, the valuation; 
and third, the joint commission — the Chinese delegation could not 
but express their deep regret that the Japanese delegation should 
desire to take such a stand. He desired to be informed if he had cor- 
rectly summarized the situation as it stood in saying that substan- 
tially the only divergence of views which existed in the case of pay- 
ment by installments was as to whether a Japanese associate traffic 
manager or a Japanese district engineer should be appointed for the 
railway ; and that in the Case of cash payment the difference centered 
arouncl the question of making deposits, as the Japanese delegation 
desired that the total amount should be deposited before the transfer 
of the railway was started, while the Chinese delegation proposed 
that such deposit should be effected by different stages over a period 
of nine months, within which the transfer of the railway was to be 
completed. Before closing his observation he desired to be permitted 
to say that he had made his remarks with a great deal of hesitancy 
because, if he had had time to prepare, he would have liked to make 
a more comprehensive statement in reply to Baron Shidehara's 
statement. 

Baron Shidehara said that he would like to mention a few points, 
after listening to Dr. Koo's interesting remarks. First, the term of 
nine months for the completion of the transfer of the railway prop- 
erties had only been tentatively agreed. He remembered having said 
that this question involved considerations of a technical nature and 
that he had to consult railway experts, of whom there were none in 
the staff of the Japanese delegation. Only he had thought that the 
transfer would practically be completed in nine months. The agree- 
ment on that point was not a definite one, but was subject to modifi- 
cations according to exact information later on. Then, Dr. Koo, in 
stating that the Chinese delegation had made considerable concessions 
in order to meet the Japanese wishes, had cited as an instance the 
question of the improvements on and additions to the railway prop- 
erties left by the Germans. From the Japanese point of view, how- 
ever, the Chinese undertaking to pay for those improvements and 
additions could hardly be considered as a concession on China's part. 
He had thought that that would be quite a natural arrangement, for it 
was only proper for China to pay for whatever was spent by the 
Japanese authorities upon the permanent improvements and ad- 
ditions to the railway properties. He did not mean to deny that his 
Chinese friends had made some concessions, but, on the other hand, 
he hoped that they would agree that the Japanese delegation had 
gone very far — much farther than they had — to meet the Chinese 
viewpoint. Regarding the question of appointment of Japanese ex- 
perts for the Shangtung Railway section, he had stated several times 
that Japan attached the greatest importance to the appointment by 



170 

China of a district traffic mana<i;er for that railway section on the 
recommendation of Japanese interests, as provided for in many of 
the Chinese railway loan agreements. He had also stated that a 
Japanese associate chief accountant should be enlisted in the service 
of this section. In the course of their discussions he had stated that 
if China should <rive satisfaction in re^jard to the appointment of 
those experts, the Japanese dele«:ation would be ready to recommend 
to Tokyo the adoption in principle of the Chinese proposal regard inj^ 
the form of payment and the question of period. But, unfor- 
tunately, the Chinese delegates did not find it possible to accept ttie 
point on Avhich special importance was j^laced by Japan, and in that 
situation he and his colleagues felt that they had really done their 
best to meet the Chinese wishes within the limits of the responsibility 
which they could assume as delegates of the Japanese Government. 
He could assure his Chinese friends that he and his colleagues were 
no less regretful than the Chinese delegation that this difficult stag© 
had been reached, but they had really gone very far, much farther 
than their instructions permitted them to gx>- So long as the essen- 
tial points upon Avhich they placed especial importance were not 
accepted, the only course left open to the Japanese delegation was 
to report the whole matter to Tokyo before proceeding any farther in 
the discussion. It was far from his intention to intimate that 
negotiation should be suspended. If it was to be suspended, he 
hoped it would be only for a short time. In the meantime he hoped, 
if agreeable to the Chinese delegation, that they might discuss other 
matters relating to the settlement of the Shantung question. He 
hoped, moreover, that the Chinese delegation would also be good 
enough to communicate with the Peking Government and obtain 
instructions. The wdiole question could not be satisfactorily settled 
W'ithout concession on both sides. He hoped that his Chinese col- 
leagues would make the situation clear to their Government, and 
that they might again meet after both sides had received instructions. 
Dr. Koo said that Baron Shidehara had made the Japanese posi- 
tion very clear. He had no intention to prolong the conversation too 
much, but it seemed to him that the whole difference, if it was a 
difference at all, centered around the point of expert assistance for 
the railway. Perhaps he ought to repeat that the Chinese delega- 
tion had understood from the beginning that in asking them not to 
insist upon cash payment the Japanese delegation had desired to 
retain interest in the railway of such nature as certain foreign powers, 
generally had in railways in China. While they found great diffi- 
culty to meet the Japanese delegation on that point, the Chinese dele- 
gation had agreed to give Japan interest to the same extent as the 
British had in the Tientsin-Pukow line. It might perhaps be asked 
wherefore this particular line should have been mentioned. The 
answer was that the Tientsin-Pukow line was right next to the Shan- 
tung Kailway and that it was China's intention to connect these two 
lines and run them as one system. It was desirable, therefore, that 
these two lines should be placed on the same footing as far as foreign 
appointment was concerned. He washed only to add that the question 
of the railway had now been discussed for 10 days under the impres- 
sion — almost on the understanding — on the Chinese side, that the 
Japanese delegation throughout would have been communicating 
with their Government. It was rather a matter of surprise that they 



3 71 

had not obtained instructions before. As to the sugo;estion that 
meanwhile other questions should be taken up, it was rather difficult 
for the Chinese delegation to see their way to follow it. He might 
be allowed to recall that at the first meeting the Chinese delegation 
had asked that the railway question should be discussed first. In 
deference to the desire of the Japanese delegation, the question had 
been postponed a week, until the pressure upon the Chinese delegation 
had become too strong to postpone that question any further. They 
had now been engaged 10 days in the discussion of that question. 
If they were to proceed to other questions while leaving both sides 
in uncertainly as to the eventual outcome of the railway question, 
which was admittedly the most important of all, he and his colleagues 
wondered whether it would really be wise either for the Chinese or 
for the Japanese delegation. If they were not to come to an under- 
standing on this important and complex question of the railway, but 
were to take up other questions while leaving this matter to future 
settlement, he doubted whether much time would be really gained. 
For it was possible that if, a week later, they were to take up the 
question of the railway again, after dealing with other questions, a 
great deal of time would be required to refresh their memories on 
various phases of the question. That was the view of the Chinese 
delegation with regard to the future course to be taken. 

Baron Shidehara said that, while Dr. Koo expressed surprise that 
the Japanese delegation should not have obtained instructions earlier, 
it was practically impossible for them to do so until the decisive 
nature of the Chinese plan had been made clear to them. The dis- 
cussions for the last few days had been entirely devoted to finding 
out the exact nature of the Chinese plan. Of course, the Tokyo 
Government had been kept informed of what had been taking place 
at the meetings. He might, perhaps, frankly state that in regard to 
the settlement of the railway question, the Japanese delegation had 
not received any instructions from home. As he had already stated, 
they had been proceeding without waiting for any instructions from 
home, taking upon themselves the whole responsibility for what they 
had so far done. As for his suggestion that other questions should 
be taken up pending further discussion on the railway question, it 
was based simply upon the idea that if the meeting should now be 
suspended it would give an impression to the public as if there were 
a break-up expected. He did not want to give that impression. In 
fact, there was no break-up. If instructions from Tokyo should be 
entirely at variance with the Chinese plan, then a break-up might 
arise. At present, however, he was really looking forward to some 
communication from Tokyo which would provide reasonable basis 
for continuing discussions. He had thought it would be useful to 
discuss other matters meanwhile, but if the Chinese delegation were 
not inclined to do so the only course was to adjourn until further 
call. He trusted, however, that the Chinese delegation were as 
anxious as the Japanese delegation to reach a settlement of the whole 
question. As he had said before, there must be found some means 
of adjustment. If that were the case, he did not see Avhy other mat- 
ters should not be taken up pending instructions from home. 

Dr. Sze said that Baron Shidehara's apprehension on the score of 
the impression that the suspension of the conversations might give 
to the public mind might easily be disposed of. Moreover, if the sub- 



172 

ject of discussion were to be changed, it would become necessary for 
the Chinese delegation to make explanation to their own people. 
Therefore, so far as that part of Baron Shidehara's observation was 
concerned the result would seem to be the same either way. 

Dr. Koo asked whether he was to understand that the Japanese 
delegation wished to await instructions on the mode of payment. 

Baron Shidehara said that he was not quite sure if it would be 
accurate to say "the mode of payment," for the retention of certain 
interest in the railway, for instance, could not properly be called a 
question of payment. 

Dr. Koo said that was what he meant in asking the question. The 
one point upon which the two delegations had not been able to agree 
was the question of expert assistance. He meant to ask if it was upon 
that point that the Japanese delegation desired to wait upon in- 
structions. 

Baron Shidehara said that the position was that the Japanese Gov- 
ernment might prefer cash payment instead of treasury notes; he 
could not say at that moment what attitude Tokyo might take. The 
Japanese delegation proposed to submit the whole matter to their 
home Government. Should cash payment be preferred, the question 
of deposit had yet to be decided. 

Dr. Koo said that he had referred to the question of Japanese ex- 
pert assistance because he understood the Japanese delegation to 
attach special importance to that matter. He wondered whether the 
Japanese delegation had any preference as to the two alternative 
plans. 

Baron Shidehara said that he could not say that the Japanese 
delegation had any preference for either plan. It was difficult for 
them to agree to the plan of payment by treasury notes on the terms 
offered them. For instance, as regards the interest Japan desired 
to retain in the railway, if it was confined to the extent of having 
a Japanese district engineer, they did not feel justified in recommend- 
ing to TolrV'O, on their own responsibility, that the plan should be 
accepted. If the plan of the payment by treasury notes was to be 
accepted, he felt that the question of traffic manager and chief ac- 
countant should have first to be decided in a way satisfactory to 
Japan, but the Chinese delegation had not been able to give satisfac- 
tion on the question of personnel. He would therefore like to leave 
the matter in the hands of the Japanese Government, who would 
consider the whole situation and come to a decision as to what they 
should do. It would not take long for the Japanese Government to 
give instructions to the delegates, for it had been kept informed of 
the results of previous discussions. But since the delegates them- 
selves had not until that day clearly understood the exact nature of 
the Chinese projDosition, it was impossible for the Japanese Govern- 
ment to have given definite instructions earlier. Perhaps the in- 
structions might be sent almost any moment. 

Dr. Sze said that, therefore, adjournment should be taken, in the 
hope that instructions might come to-morrow. 

Baron Shidehara said that he hardly expected to have instructions 
so soon, though he would do his best to ask for instructions as soon 
as possible. 

Mr. Hanihara wondered if he might ask a question. He desired 
to be informed if, in the situation as it stood, there was nothing for 



173 

the Chinese delegation to ask further instructions about from their 
Government. 

Dr. Sze said that if they asked for instructions Peking would say 
that China had shown everything. 

Dr. Koo said that, indeed, the Chinese delegation had shown every 
card in their hand, while, after 10 days, they still did not know what 
was the exact position of the Japanese delegation. 

Mr. Hanihara suggested adjournment until Tokyo was heard from. 

Baron Shidehara said that he sincerely hoped that the Chinese 
delegation would report the whole situation to Peking and get in- 
structions. 

Dr. Sze said the Chinese deelgation were informing their Govern- 
ment every day. 

Baron Shidehara asked if they had no further instructions to ask 
from Peking. 

Dr. Koo said that the Chinese delegation had been exceeding their 
instructions considerably. 

Baron Shidehara said that in that respect, the Japanese delega- 
tion was doing the same thing, and perhaps in a greater degree. 

The communique was issued in the annexed form (Annex I). 

SJC-17] 

Annex I. 

December 20, 1921. 
[For the press.] 

Issued hy the Chinese and Japa/nese delegations. 

At the seventeenth meeting of the Chinese and Japanese delegates 
relative to the question of Shantung, held at the Pan American Union 
Building at 3 p. m. to-day, the two delegations discussed the question 
of the plan of payment in cash of China's liabilities regarding the 
Shantung Eailway properties and also an alternative plan of the pay- 
ment in Chinese treasury notes, having special reference to the ques- 
tion of the appointment by China of Japanese experts in the service 
of the Tsingtao-Tsinanfu Hallway, as proposed by the Japanese dele- 
gation. These questions involving points on which it was found 
necessary for the Japanese delegation to consult with its home Gov- 
ernment, the meeting adjourned at 6.30 p. m. pending receipt of in- 
structions by the Japanese delegation from Tokyo. 



EIGHTEENTH MEETING. 



The eighteenth meeting, held in governing board room, the Pan 
American Union Building, Washington, D. C, at 5 o'clock in the 
afternoon of Wednesday, January 4, 1922. 



PEESENT. 



China.— Dr. Sao-Ke Alfred Sze, Dr. V. K. Wellington Koo, Dr. 
Chung Hui Wang. Secretaries : Mr. T. Y. Tsai, Mr T. F. Hsu, Mr. 
C. H. Zee, Mr. Chuan Chao, Mr. T. H. Koo. 
93042—22 12 



174 

Japan. — Baron K, Shidehara, Mr. M. Hanihara, Mr. K. Debuchi. 
Secretaries: Mr. S. Saburi, Mr. E. Kimura, Mr. H. Saito, Mr. T. 
Shiratori. 

Also present as observers : 

The United States of America. — Mr. John Van A. MacMurray, 
Mr. Edward Bell. 

The British Empire. — The Right Hon. Sir John Jordan, G. C. I. E., 
K. C. B., G. C. M. G. ; Mr. M. W. Lampson, M. V. O. 

THE QUESTION OF RAILWAY. 

Baron Shidehara said that he was happy to feel that with the ad- 
vent of the New Year they were able to resume consideration of 
the question of the Shantung Railway. The Chinese delegates would 
remember that at the last meeting he had recapitulated the progress 
of discussions on the question. He had stated that the only plan 
which the Japanese delegates had felt could be recommended to the 
Japanese Government as a sul)stitute plan of the original proposal 
of the joint enterprise was a plan of ordinary railway loan agree- 
ment on the basis of terms of similar agreements of comparatively 
recent dates. At that time the Japanese delegates had had no au- 
thority from Tokyo to make such a proposal but they had taken 
upon themselves the whole responsibility to make that proposition, 
so that if that was agreeable to the Chinese delegates they might 
recommend the Tokyo Government to consider that new plan. Un- 
fortunately, however, that plan had not been found acceptable to 
the Chinese delegates and the latter had offered two alternative 
plans. First, the plan of the immediate cash payment, and second, 
the plan of payment in treasury notes. After considerable discus- 
sions both the delegations had found, much to their regret, that they 
could not come to an agreement, and the Japanese delegates had 
thought that the only course left for them was to report the whole 
matter to Tokyo and ask for instructions. The Japanese delegates 
had now received instructions to the effect that the Japanese Gov- 
ernment, being anxious to find a speedy and satisfactory solution 
of the whole question, would be ready to agree to the plan of the 
\j railway loan agreement, but that was the limit of their conces- 
' sion. It was not possible for them to agree to any plan short of 
an ordinary railway loan plan. In the situation, the Japanese dele- 
gates thought the only way left for them was to ask the Chinese 
delegates to reconsider the whole matter and the Japanese delegates 
would be glad to hear any suggestions which the Chinese delegates 
cared to make. 

Dr. Sze said that in order to avoid any possible misunderstanding 
it would be advisable to have a clear notion of what was in the mind 
of Baron Shidehara. He wondered whether the Chinese delegates 
should consider what Baron Shidehara had said as final or as still 
subject to further prolonged reference home. 

Baron Shidehara said that the Japanese delegates were quite will- 
ing to resume the conversations and exchange views in the matter. 
What he had stated was the substance of the instruction received 
from Tokyo. 

Dr. Sze said that he wanted to know to what extent the conver- 
sations could be carried on to useful purpose. If only exchanges 



175 

of views were to be continued on vague lines, it would be mere 
waste of time. Therefore he wanted to be very clear on that point. 

Baron Shidehara said that if Dr. Sze meant to ask if what he 
had said was final, he did not want to say that it was. To avoid 
such inference, he had said that the Japanese delegates were ready 
to hear suggestions from the Chinese delegates. Nothing was final 
between friends. 

Dr. Sze said that he understood that certain steps had been taken 
in Peking by the Japanese minister in regard to the Shantung ques- 
tion. He was sorry that the Japanese delegates had not taken the 
Chinese delegates into their confidence. 

Baron Shidehara said that there appeared to be certain misun- 
derstanding as to what had transpired in Peking between the Chi- 
nese minister of foreign affairs and the Japanese minister there. 
The Japanese minister simply intended to ask the attitude of the 
new cabinet of China on the Shantung question. Of course, the 
Japanese minister had expressed his hope that a speedy answer 
would be given to his question, but nothing in the nature of finality 
had been spoken. 

Dr. Sze said that the Japanese minister had wanted to have a 
categorical reply. 

Baron Shidehara said that what the Japanese minister had asked 
was whether the Peking Government favored or were against the 
railway loan agreement plan. It would only be natural to make such 
inquiry of a new cabinet to ascertain whether its policy would be 
different from the policy of the outgoing cabinet. He had not full 
information as to the conversation which had taken place in Peking, 
but, so far as he had been informed, the Japanese minister simply 
put to the Chinese minister of foreign affairs a question as to 
whether the new cabinet was going to follow the same policy hither- 
to adopted. He had not said anything in an unfriendly spirit. 

Dr. Sze said that, according to the information he had, Mr. Obata, 
under instructions from the Japanese cabinet, demanded of the 
Chinese Government a categorical reply as to whether the loan 
agreement plan was agreeable. The Chinese delegates were sur- 
prised at such development of affairs. They should have been taken 
into confidence by the Japanese delegates if such steps were to be 
taken. The British and the American friends at the table should 
also have been previously informed of any such demarche taken 
by Japan. In resuming their conversation, the Chinese delegates 
desired to know clearly to what extent the Japanese delegates had 
authority to negotiate. 

Baron Shidehara replied that he and his colleagues had the same 
authority as before. 

Dr. Sze said that if they were discussing the matter in the same 
way as before, and if finally the Japanese delegates were to say the 
same thing and refer the matter to the home Government, it would 
cause the Chinese delegates great inconvenience. He and his col- 
leagues, therefore, desired to be clearly informed as to that point. 
After the Chinese delegates had offered two plans, and those two 
plans had been found unacceptable by the Japanese delegates, he 
desired to know what the Japanese delegates intended to propose. 



176 

Baron Shidehara said that what Japan now intended to propose 
was a plan of an ordinaiy loan agreement on terms of such loan 
agreements as China had concluded with other foreign nationals. 

Dr. Sze said that one of the plans proposed by the Chinese dele- 
gates contained terms even more favorable than the terms of the 
Tientsin-Pukow Railway loan, and also the terms of the Kirin- 
Hueining Railway loan. 

Baron Shidehara said that the Japanese proposal was that the loan 
contract should be made along the lines of loan contracts of com- 
paratively recent dates. 

Dr. Sze said that the Kirin-Hueining Railway loan was of a very 
recent date. 

Baron Shidehara stated that that loan contract was still in a stage 
of preliminary agreement. It was only provisional and had not been 
signed. 

Dr. Sze said that that agreement had not been signed because the 
Japanese financiers desired certain changes in the terms. 

Baron Shidehara said that he had not yet studied the loan con- 
tract regarding the Kirin-Hueining Railway, but that he had in 
mind some loans contracted in 1913 and 1914. He understood that 
there were three or four loan agreements made in those years, and 
that since that time no new agreements had been concluded. 

Dr. Sze said that as he remembered it had once been pointed out 
by Baron Shidehara that the plan of the loan agreement was brought 
up because the management and operation of the Chinese railway'' 
were not efficient enough. The Chinese experts had made special 
studies of that matter and made a comparative investigation of the 
Kirin-Changchung Railway and the railways under purely Chinese 
management. They further made comparative studies of the Jap- 
anese and Chinese railways, so far as statistics were available in 
regard to the former. Such studies tended to show that the Chinese 
could manage their railways efficiently. He would read to the Jap- 
anese delegates the statistics, but before that he would recapitulate 
the Chinese position in the question under discussion. 

Here Dr. Sze read his statement (Annex I). 

Dr. Sze, continuing, said that he had given a considerable length 
of time to reading the statement, which he would have avoided if 
he could have helped it. The Japanese disinclination to entertain 
either of the two plans might have been based on the misapprehen- 
sion of the Chinese efficiency in management. He thought that it 
would be only fair to give that account of the actual condition of the 
Chinese railway. That statement was not made with any idea of 
disparagement of the Japanese railway administration. It was 
simply made with the hope that with such information the Japanese 
delegates might be able to see their way to reconsider the plans 
suggested by the Chinese delegates. 

Dr. Koo said that his colleague had clearly summarized the va- 
rious stages which the Chinese delegates had traveled through in 
order to meet the Japanese wishes. The gist of Baron Shidehara's 
observations seemed to be that the Japanese delegates now desired 
to revert to the position of asking China to accept the Japanese loan 
for the purpose of effecting payment for the Shantung Railway 
properties. That question of Japanese loan had been brought up 
before at one of the previous meetings and he recalled that the 



177 

Chinese delegates, on their part, had given reasons why they would 
not be able to accej)t that plan. Amongst others, he recalled two 
reasons which had been given. The first was that this Shantung 
Railway stood in a different position from the general class of rail- 
ways for which loan contracts had been entered into by China. The 
program here was really about the act of sale on one side and the 
act of purchase on the other. It was very difficult, at least so far 
as he could see, to support the demand on the part of Japan that 
China, in paying for the Shantung Railway, should contract a Jap- 
anese loan, the more so because China had offered cash payment. In 
fact, that was the original Chinese proposal and they still preferred 
that plan. But, in deference to the Japanese desire to retain an 
interest in the railway, the Chinese delegates had adopted the method 
of deferred pa^^ment. The second reason that had been given 
was that the insistence by Japan upon the plan of the railway loan 
contract would give rise to various misgivings in China. Moreover, 
it would be difficult to explain to the Chinese bankers who had made 
offers to the Chinese Government. On the other hand, the Japanese 
proposal would also offer grounds for misgivings because, as the 
Chinese delegates understood, Japan had proclaimed her sincere 
desire to return to China the properties formerly held by Germany, 
and also because later they had offered to restore the railway to 
China's full OAvnership and operation. He now wished to know the 
real purpose of the Japanese Government in insisting on China tak- 
ing a loan from Japan. By previous discussion of the question, he 
had been given to understand that the Japanese position had been 
to relinquish the idea of loan contract and consider the Chinese plan 
of deferred payment, and that the difference had centered around 
minor points — the mode of making deposits in the one case and the 
employment of experts in the other. To-day, he and his colleagues 
understood that the Japanese delegates desired to revert to the 
original plan of Japanese loan. He was not able to understand the 
reason why his Japanese colleagues should advance this proposal 
again. He should be glad to learn the grounds for this stand of the 
Japanese delegation. 

Baron Shidehara said that, if he understood correctly, his Chinese 
friends seemed to presume that the Japanese delegates had agreed 
unconditionally to the sale of the railway properties, but that was 
not at all the case. It must be remembered that all terms of adjust- • 
ment of the question under discussion were mutually interdependent. 
One of the terms was naturally the transfer of the property, and 
another term was that the railway loan plan should be accepted. 
They were mutually dependent. The Japanese delegates had not 
agreed to sell the railway unconditionally. If the Chinese delegates 
started from the presumption that the Japanese delegates had agreed 
to sell the railway properties the conclusion would loe utterly erro- 
neous. Dr. Koo had just said that the two Chinese alternative pro- 
posals had been agreed to, but the Japanese delegates had made it 
clear that the only plan which they could assume responsibility upon 
themselves to recommend to their Government was the plan of rail- 
way loan agreement. It was true that the Chinese proposals had 
been discussed, but then it was only for the purpose of clarifying 
the precise nature of those plans. The proposal of the Japanese 
Government itself had always been the plan of joint enterprise. 
That, however, being found unacceptable to the Chinese delegates, 



178 

he and his colleagues had said that they would recommend to their 
Government the plan of loan agreement as a substitute. The 
Chinese delegates had not felt free to agree to that substitute plan 
and there the whole matter had come to a deadlock. The matter 
had been submitted to Tokyo, and the Japanese Government now, 
for the first time, proposed the plan of loan agreement. What he 
desired to laiow was whether it was. the intention of the Chinese 
delegates to consider this plan of railway loan agreement, to take 
that as a basis of further discussion. If they felt that there was no 
room for them to reconsider their position on that plan, he did not 
know what to do. 

As to the long statement Dr. Sze had just read, he would like to 
reserve for a future occasion any comment that he might feel inclined 
to make in reply. 

Dr. Koo said that, to confess the truth, he and his colleagues had 
Tiot expected that their Japanese friends would again propose the 
loan agreement plan. He would be much obliged if reasons for 
Japan preferring the loan agreement to either of the Chinese plans 
could be given. 

Baron Shiclehara said that those reasons had been clearly stated 
on several occasions before. The Japanese point of view was that 
these railway properties Avere now Japanese property; that they 
were certainly not Chinese property. Now, in transferring to China 
those Japanese properties Japan desired to retain a certain interest 
in the railway, an interest such as other foreign nationals were 
freely permitted to possess in many Chinese railways. She pro- 
posed to hand over the railway properties to China while retaining 
only interest of that nature upon them. It was not meant to retain 
the management or operation of the railway, which would go to 
the Chinese Government. Even with regard to the employment of 
experts, Japan had expressed her intention that these experts should 
be placed under Chinese higher railway authorities. 

Dr. Koo said that, in other words, the main consideration with 
the Japanese delegates was apparently the retention of some in- 
terest in the railway. If he remembered correctly, it was the con- 
tention of tlie Japanese delegates that the Chinese plan would result 
in discrimination against Japan. It was in order to forestall such 
impression on the part of the Japanese people that the Chinese dele- 
' gates had proposed the plan of deferred payment. They were still 
ready to meet their Japanese friends that far. 

Baron Shidehara asked if he understood that his Chinese col- 
leagues meant to hold to either of the two plans proposed by China 
and that they could not consider the plan of railway loan agree- 
ment. As he had said a moment ago, the Japanese Government 
could not go any farther than the plan of loan agreement. That 
was the limit of their concession. He would like to know if the 
Chinese delegates could not agree in principle to that plan. 

Dr. Koo said that the Chinese position was to meet by deferred 
payment the Japanese wish to retain interest in the railway. 

Baron Shidehara said that Japan wanted to retain that interest 
by means of this loan agreement plan. 

Dr. Koo asked why that particular form was desired. 

Baron Shidehara said that that particular form happened to be 
quite common in regard to railways in China. He wanted to know 



179 

why China should find it difficult to adopt that plan for this par- 
ticular railway. 

Dr. Sze said that the analogy did not apply to the Shantung Rail- 
way, the line having long been built. China had taken the first 
opportunity to take over the Peking- Hankow Railway by making 
use of a loan from the Banque de Chine and the Hongkong & Shang- 
hai Banking Corporation. The two banks had furnished the loan 
but had not made any demand for control of the railway. In regard 
to the Shantung Railway, China had agreed to give Japan much 
more than to the Belgian Bank and the Hongkong & Shanghai Bank. 

Baron Shidehara said that if there were any difference between 
this case and the other cases, he felt that the benefit of that difference 
lay with Japan. In the present case the property in question was 
Japan's property. There was a fundamental difference between this 
and other railways. He did not recall any case where foreign prop- 
erties had been handed over to China under such generous conditions 
as were now proposed by Japan. 

Dr. Sze said that no useful purpose would be served by academic 
discussion of the legal phase of the railway ; he would only mention 
that China had a share in the railway properties. 

Baron Shidehara said that shareholders were not the owners of 
properties. He agreed with Dr. Sze that it would serve no use- 
ful purpose to stick to legal questions — only he desired to know if 
there was no room for the Chinese delegates to consider Japan's 
offer of an ordinary railway loan agreement. He did not mean to 
impose this plan upon them. He merely wanted to know if they 
could not reconsider their position in regard to that plan. 

Dr. Sze said that the original Chinese proposal was to give Japan 
interest in the railway. If Baron Shidehara could give reasons for 
preferring the loan plan, it would help the Chinese delegates a great 
deal. 

Baron Shidehara said that, as the Chinese delegates knew, the 
plan of railway loan agreement was a plan of compromise. The 
Japanese Government found it impossible to agree to the plan of a 
cash payment or to that of treasury notes. In insisting upon the 
original plan the Chinese delegates were apparently not prepared 
to make any more concessions. 

Dr. Sze said that the Chinese delegates had made so many con- 
cessions, and that they must request to be told in what point their 
plan was unacceptable. 

Baron Shidehara asked if it was clear to the Chinese delegates 
that the plan of cash payment would give no interest to Japan in the 
railway. 

Dr. Sze answered in the affirmative. 

Baron Shidehara asked again if it was clear to Dr. Sze that the 
plan of deferred payment would give to Japan interest in the rail- 
way to a very much less extent than that ordinarily granted to for- 
eign capitalists in other railways in China. 

Dr. Sze said that the plan of deferred payment would give to Japan 
much more interest in the Shantung Railway than the British had 
in the Tientsin-Pukow Railway. 

Baron Shidehara said that Japan wished the same interest as for- 
eign capitalists had in other railways. He wondered if it would be 



180 

useful at all to continue discussion of reasons and argument about 
legal technicalities. 

Dr. 8ze said that if the Japanese proposal were made clear to the 
Chinese delegates they would, perhaps, be prepared to make conces- 
sions. As it was, it was as if they were groping in darkness. 

Baron Shidehara asked if the proposal was not really clear to the 
Chinese delegates. 

Dr. Sze said that he regretted to say that it was not. 

Baron Shidehara said that when he mentioned instances of rail- 
way loan agreements he did not have in mind such a railway as the 
Tientsin-Pukow Kailway, which had so long been in operation. He 
meant later loan agreements which China had concluded with British, 
French, and other financiers. 

Dr. Sze said that the most recent agreement was that for Kirin- 
Huei-ning Railway concluded with Japanese capitalists. 

Baron Shidehara understood that that agreement had not been con- 
cluded yet. 

Mr. Hanihara said that as far as he knew there was only a provi- 
sional agreement, and in that agreement there was no mention of the 
term of the loan. The negotiations had been going on for two years 
and had not yet been concluded. 

Baron Shidehara asked if the Chinese delegates objected in prin- 
ciple to the plan of the railway loan agreement. 

Dr. Sze said that the Chinese delegates could not agree to anything 
vague. In the Japanese note of September 7 the term " in general " 
had been used. Baron Shidehara now asked if the Chinese delegates 
agreed " in principle." Although these terms were very generally 
used, he confessed he did not know what was really meant by them. 

Baron Shidehara asked whether the Chinese delegates were dis- 
posed to discuss the railway loan agreement. 

Dr. Sze said that first of all he desired to have a clear notion in 
his mind in what respect the Japanese delegates found the plan of 
deferred payment unacceptable. If Baron Shidehara would be 
good enough to explain more in detail, he and his colleagues might 
be able to consider the Japanese proposal. 

Baron Shidehara wondered whether Dr. Sze meant to say that the 
Chinese delegates could not see any difference between the loan 
agreement and the deferred payment. 

Dr. Sze said that in a sense he saw the difference, but that under 
the plan of deferred payment the Chinese delegates had gone so far 
as to agree to the appointment of the Japanese district engineer. 
He desired to hear further explanation as to what was in the mind 
of the Japanese delegates, because he and his colleagues were trying 
to meet the Japanese delegates as far as possible. 

Baron Shidehara thought that the Japanese delegates had clearly 
stated their position several times. The Chinese delegates knew very 
well that the deferred payment suggested a direct transaction be- 
tween the two Governments, while the loan agreement suggested a 
transaction between the Chinese Government and Japanese capi- 
talists. He had already repeatedly explained that it would not be 
proper for the Japanese Government directly to hold interest in 
the Shantung Railway after it was handed over to China. 

Dr. Koo stated if the Japanese Government were to forego their 
direct interest in the railway, the situation would be clearer. The 



181 

Chinese Government would incur a debt to the Japanese Govern- 
ment. A government might not be free to hold such interest, but 
would surely be free to be a creditor ; various European Governments 
were now owing large sums of money to the American Government. 
In other words, it was not the first time that the plan of loan agree- 
ment had been brought up and the difficulty of the Chinese delegation 
in accepting such a plan still remained to this day. Because of that 
difficulty, the Chinese delegates had tried hard to find a way to meet 
the Japanese wishes to retain interest in the railway in some form 
and it was in order to get the two delegations out of the difficulty 
that the plan of the deferred payment was conceived. He and his 
colleagues had felt happy because that mode of payment seemed to 
them to meet the wishes of both sides. The Chinese delegates still 
hoped that the form would be abandoned and the substance taken by 
the Japanese delegates. The concession on Japan's part would be 
very little, but to the Chinese delegates it would mean a great deal, 
because Chinese bankers had offered to raise the necessary funds for 
the purchase of the railway. 

Baron Shidehara asked whether the difference between the de- 
ferred payment and the railway loan agreement was realized by 
the Chinese delegates. 

Dr. Koo replied that undoubtedly there was a difference of form. 

Baron Shidehara said he did not know whether it was a matter 
of form. There was a vast difference between a direct transaction 
between Governments and transaction between a Government and 
capitalists. The interest to be retained in the plan of the deferred 
payment would be the interest of the Japanese Government, where- 
as, under the loan agreement, the interest to be retained would be the 
interest of the Japanese nationals — of the private Japanese financiers 
concerned. There was a difference between the two, and that not 
only of form, but in substance. 

Dr. Koo said that it seemed to the Chinese delegates that a much 
wiser thing to do would be to settle this question of debt between 
the two Governments without introducing any third party. The 
Japanese capitalists had no standing in this question. Their intro- 
duction would mean complication in the matter. 

Baron Shidehara said that if that were the wise course for the 
Chinese delegates to take it was just to the same extent unwise for 
Japan to agree to it. The situation was quite clear. The Chinese 
delegates now recognized the difference between the plan of deferred 
payment and the plan of loan agreement. He wondered whether 
the Chinese delegates were not ready to discuss the ordinary loan 
agreement plan. 

Dr. Koo said that a distinction should be made between a railway 
projected to be built and one actually built. That explained one 
of the reasons why the Chinese delegates could not accept the plan 
of loan agreement for the Shantung Railway, apart from various 
other important reasons. 

Baron Shidehara said that at the same time the Chinese dele- 
gates should recognize the difference between the building of a new 
railway and the transfer of the railway and its appurtenant proper- 
ties already in the hands of Japan. 



182 

Dr. Koo said that he, of course, recognized the difference and that 
was the reason why an analogy between the Shantung Railway and 
other railways would not really be useful. 

Baron Shidehara said that Japan Avas now ready to hand over 
the Japanese properties on the basis of an ordinary loan agreement. 
That was a concession on Japan's part. He hoped that the Chinese 
delegates would consider the question overnight and see whether 
they could discuss the loan agreement. 

Dr. Sze hoped that the Japanese delegates would also consider 
the Chinese proj^osal of the deferred payment. 

Baron Shidehara said that the instructions received by "the 
Japanese delegates were to the effect that it was not possible for 
the Japanese Government to discuss the plan of the deferred pay- 
ment, which he understood to be the same thing as a payment in 
treasury notes. 

Dr. Sze said that if the plan of paying in treasury notes was a 
stumbling block, then the Chinese delegates could think overnight 
to find a means of getting around it. If any other point should be 
impeding Japan's acceptance of the Chinese proposal he and his 
colleagues would be glad to think that point over. They were always 
anxious to meet the Japanese point of view. 

Baron Shidehara said that he would be glad to hear the views of 
the Chinese delegates. He repeated that the treasury notes plan 
would in no case be acceptable to the Japanese delegates. 

Dr. Sze appreciated what Baron Shidehara had said, but asked 
him to remember that the Chinese delegates would find it very hard 
to explain if they were to reject the patriotic offer of the Chinese 
bankers to provide the necessary funds to purchase the- railway. 

Baron Shidehara said that, according to what he had heard at the 
last meeting, he thought that it would be impossible for China to 
make the cash payment in one installment. 

Dr. Sze said tliat if that was offering difficulty in the way of 
Japanese acceptance he should try to find a way out as to that point 
also. He was only too anxious to meet the Japanese delegates. 

The communique was issued (Annex II) and the meeting ad- 
journed at 7 o'clock until 3 p. m. to-morrow, if the meeting of the full 
committee on naval armament was finished in the morning, or at 5 
o'clock if the said meeting should continue into the afternoon. 

Japanese Delegation, 

W ashington^ D. 6^., ^ January. 1922. 

SJC-18] 

Annex I. 
Statement hy the Chinese delegation. 

The conversations with regard to the railway have reached the 
following point: 

The Chinese delegation has proposed two plans for the acquisi- 
tion by the Chinese Government of the ownership and control of the 
railway. 

First plan. — Japan to transfer to China the railway and its 
branches together with all properties appurtenant thereto, includ- 
ing wharves and warehouses and other similar properties, it being 
understood that the question of the mines appurtenant to the rail- 



]83 

way shall be set apart for separate consideration. The said transfer 
to be completed as soon as practicable and not later than nine months 
after the coming into force of the agreement upon the whole Shan- 
tung question. 

China to pay to Japan the actual value of the railway properties, 
consisting of the sum of 53,406,141 gold marks or its equivalent plus 
the amount which Japan, during the period of her administration 
of the railway, has actually expended for permanent improvements 
on and additions to the railway properties, less a suitable allowance 
for depreciation. 

A Sino- Japanese joint commission to be appointed to arrange all 
matters of detail connected with the transfer of the railway and its 
appurtenant properties, or with the valuations of the improvements 
and additions. 

China to make a cash payment for the total amount due for the 
railway and its appurtenant properties, the moneys for which pay- 
ment to be deposited in a bank of a third power in the following 
manner: Two-fifths at the end of three months after the conclu- 
sion of the Shantung agreement, one-fifth six months after such 
date, and the remaining two-fifths nine months after such date. 
According to this plan no undertaking is to be given by China to 
employ upon the railway any officials of Japanese nationality. 

This plan the Japanese delegation is willing to recommend to its 
Government only under condition that China deposit the total amount 
to be paid in a hank of a third power at or prior to the time of the 
beginning of the transfer of the railway, and this sum to be paid to 
Japan pari passu as the transfer is proceeded with. 

Second flan. — The same as plan 1, except that payment is to 
be made by China in installments extending over 12 years, with an 
option on the part of China at any time after three years, upon giv- 
ing six months' notice, to pay all remaining unpaid installments. 
The first installment is to be paid on the day on which the transfer 
of the railway and properties is completed, and the remaining in- 
stallments to be paid in Chinese Government treasury notes secured 
on the revenues of the properties transferred. 

China herself to select and to employ in the service of the railway 
a district engineer of Japanese nationality. 

The Japanese delegation has agreed to recommend the second 
plan to its Government only upon condition that China appoint a 
Japanese associate traffic manager and Japanese associate account- 
ant upon the railway who are to cooperate with the Chinese traffic 
manager and Chinese accountant, and under the authority of the 
Chinese general manager of the railway. 

The Chinese delegation wishes to point out that the Japanese posi- 
tion is an unreasonable one as regards the insistence that China 
should pay into the bank, before the transfer is begun, the total 
amount to be paid, since this means not only that the money market 
will be disturbed by the creation in the bank of such a large credit 
in favor of the Chinese Government, but that the Chinese Govern- 
ment will, without any real necessity, lose a large amount of interest 
upon the sum thus deposited in advance of the time when it will 
need to be paid out. 



184 

As regards the insistence of the Japanese delegation that, if the 

second plan of deferred payments is adopted, a Japanese traffic man- 

ager and Japanese accountant, nominated by the Japanese Govern- 

\ ment, should be appointed by the Chinese railway administration, 

this also is unreasonable. 

A traffic manager has control over the character of service to be 
rendered shippers and the rates which will be charged them. This 
position thus would give to the Japanese not only the control over 
the revenues and expenses of the road to a large extent, and, there- 
fore, make its finances largely dependent upon their good will, but it 
would put within their keeping the most powerful weapon known to 
commercial warfare, and Avould permit of practically an unlimited 
economic exploitation of the territory served by the railway to the 
; detriment of the Chinese merchants. The demand is thus one that 
is inconsistent with the avowed intention and desire of the Japanese 
Government that the railway should be returned to Chinese control. 

The position of the Chinese on this point can not be yielded with- 
out turning its back on 25 years of progress. From 1896 until 1908 
the Chinese, their central Government, their provincial governments, 
and the general population resisted terms dangerous to their inde- 
pendence by evei'y expedient known to desperation. With the sign- 
ing of the Tientsin-Pukow agreement, however, a new attitude toward 
foreign assistance was brought about, and " Pukow terms " ever since 
have been considered synonymous with the terms satisfactory alike to 
the Chinese people and the other contracting parties. Japanese in- 
vestors themselves have recognized the propriety of such terms by 
naming them specifically as the basis for their latest contract for con- 
struction in Manchuria ; namely, on the Kirin-Huening line. Pukow 
terms provide that " after the completion of construction, the Chinese 
* * * Government * * * will appoint an engineer in chief,, 
who during the period of the loan shall be a European, without refer- 
ence to the syndicate." 

This engineer in chief was appointed for the precise purpose of 
guaranteeing that the way and structures of the line should be ade- 
quately maintained as a protection to the creditor. But the Chinese 
delegates have even strained the meaning of " Pukow terms " in the 
effort toward satisfying the objections of the Japanese delegates. 
While " Pukow terms " provide, not for the appointment of a Ger- 
man or a British subject, but merely for " a European," the Chinese 
have offered to appoint specifically a Japanese, rather than merely an 
Asiatic or a foreigner. Further stretching of these terms would 
jeopardize the fulfillment of any compact arrived at under these nego- 
tiations. A quarter of a century of struggle is at stake. 

The principal justification urged by the Japanese for the appoint- 
ment of the traffic manager has been what was conceived to be the 
necessities of the Japanese shippers along the line of the Shantung 
Eailway for efficient service. Doubts have been expressed as to the 
ability of the Chinese to give a service as efficient as that now rendered 
by Japanese. It has been proposed by the Chinese to consolidate the 
Shantung Railway with the Tientsin-Pukow Railway. The efficiency 
of the Shantung Railway under Chinese operation is to be indicated, 
therefore, by the efficiency of the Tientsin-Pukow Railway. It is not 
possible at the present time to compare the efficiency of the Tientsin- 
Pukow Railway with that of the Shantung Railway for the reason. 



18& 

that no statistics on the Shantung Railway have been made public, 
but Japanese management on another Chinese railway is exhibited 
upon the Kirin-Changchun Railway and affords an excellent com- 
parison. For example, the percentage of revenues absorbed by oper- 
ating expenses are 69 on the Kirin-Changchun Railway as against 
only 48 on the Tientsin-Pukow Railway, clearly a most favorable 
showing for Chinese management. Besides, the rates upon the 
Tientsin-Pukow Railway are considerably lower in case of passenger 
fares and more than 50 per cent lower in the case of freight rates. 
Operating expenses per 1,000 service units (ton kilometer and pas- 
senger kilometer) are only $5.70 on the Tientsin-Pukow Railway, 
while they are $15.52 on the Kirin-Changchun Railway. The trains 
hauled by the Tientsin-Pukow Railway carry twice the number of 
tons and 50 per cent more passengers than those of the Kirin-Chang- 
chun, yet the fuel consumption per train kilometer on the Chinese- 
managed line is fully a third lower than that on the Japanese- 
managed line. It has been commonly said that the inefficiency of 
Chinese lines was to be found in the large number of workmen em- 
ployed compared with the amount of work to do. Yet on the Tientsin- 
Pukow Railway there are only 14.2 men per kilometer of line, while 
on the Kirin-Changchun Railway the average is 19.4. 

South Manchurian Railway statistics are so limited that it is im- 
possible to make comparison with other lines to any great extent. 
However, it appears that in 1919 the operating expenses absorbed 
over 45 per cent of gross revenues on the South Manchurian Railway, 
compared with 34 per cent of the Peking-Hankow (a younger line 
under purely Chinese management). The net revenues on the South 
Manchurian represent a return of less than 16 per cent on the prop- 
erty, while on the Peking-Hankow Railway they represent a 17 per 
cent return. Indeed, it can be demonstrated that the management of 
Chinese Government railways as a whole is not at all inferior to that 
of Japanese railways. 

Comparison can be made between the Chinese Government railways 
as a whole and the imperial Japanese railways. For example, in 
Japan 59 per cent of the revenues are required to pay operating ex- 
penses, while in China during the same year only 48 per cent was so 
required. The net revenue of the Japanese railways represents a 
return of 7.8 per cent on the property, whereas the net revenue of 
the Chinese railways represents a return of 9.2 per cent on the in- 
vestment. All of this is accomplished with rates which are very 
similar. Under normal rates of exchange, Chinese third-class pas- 
senger fares are slightly higher, but Chinese freight rates are slightly 
lower than Japanese rates. 

On the imperial railways of Japan the number of employees per 
kilometer per line averages slightly higher than on the Chinese Gov- 
ernment railways. 

Returning to the subject of the Tientsin-PukoAv Railway, with 
which the Shantung Railway may be consolidated, the excellent re- 
sults obtained upon that line are mere promises of what is undoubt- 
edly sure to come. This line has been open to traffic only about nine 
years. As is well known, a new line is unable to show as favorable 
results as one which has a longer history. For example, the operat- 
ing ratio, as stated above, in 1919 was 48 ; in 1915 it was 62. The re- 
turns upon the investment, which in 1919 was 7.2 per cent, in 1915 



186 

was only 1.8 per cent. The average train load has increased from 206 
tons in 1915 to 319 tons in 1919. 

It is confidently asserted that, given sufficient time to develop traffic, 
Chinese railways are second to none in efficiency, measured-, of course, 
by the needs of the territory served. This is shown by the following 
comparison between lines over 200 kilometers in length, in which it is 
shown that the older the line the better it pays : 



Line. 



Date 
com- 
pleted. 



Yield on 
invest- 
ment. 



Peking-Mukden 

Peking-Hankow . . . 
Cheng Tai 

Shanghai-Nanking . 
Tientsin-Pukow . . . 
Peking-Suiyuan . . . 



1898 
1904 
1907 
1908 
1912 
1916 



Per cent. 
18.0 
17.0 
8.6 
7.5 
7.2 
5.7 



There are forces, other than mere time, working toward the fur- 
ther improvement of Chinese railways. 

When the Republic succeeded the Empire in 1912, it immediately 
started upon a vigorous program. This program consisted of two 
parts: (1) Increased construction, and (2) improved management 
of the existing lines. Within three years contracts for nearly 10,000 
miles of lines were let, contracts which to this day remain unful- 
filled for the reason that contractors could not muster the funds nec- 
essary. But the administrative program has proceeded effectively 
and rapidly. 

The new Republic found that each railway in existence was a 
separate and distinct entity, always with a national characteristic and 
often with standards and practices which reflected strong personal 
tendencies on the part of its officers. Each of these 14 lines ren- 
dered its service absolutelj^ without reference to the existence of 
the other. There was less cooperation between these railways in 
China than between the railways of the different Governments of 
Europe. Within the space of nine years practically all of this 
has been changed. Passenger train schedules which made possible 
through connections, through tickets, and through baggage service 
were first provided for. Shortly afterwards through parcels (ex- 
press) service was added and at the present time a C. O. D. feature 
is in effect. A through train service has recently been added be- 
tween Shanghai and Peking, and during this year there will be 
installed five solid all-steel, all-Pullman trains running between 
Shanghai and Peking, provided the train ferry across the Yangtse 
River is completed in time. 

The difficulties in the way of through freight service were con- 
siderably greater; but to a large extent these have been over- 
come. Interchange of rolling stock and through billing arrange- 
ments were instituted something over a year ago and the account- 
ing for all of these inter-line matters is now taken care of by a 
central organization known as the clearing house, which is made 
a subordinate bureau of the ministry of communications. During 
this same period, also, a uniform classification for goods, uniform 
conditions of carriage, both for freight and passenger traffic, have 



187 

been promulgated and put into force. Most difficult of all has been 
the complete introduction of the metric system, both for weights 
and distances. This required three years of preparation on the part 
of the English lines, but all tariffs are now published with the 
metric system only. Effective February 1, 1921, shippers were 
offered an optional service, either at their own or at railway risk. 

During the past season conferences of operating officers have 
been held looking toward a standardization of operating rules, A 
standard system of car reports and rules for the distribution of 
cars to shippers has been adopted. 

For four years the subject of physical standards has been under 
active consideration. The introduction of the metric system was 
one phase of this, but because of its bearing upon interchange of 
rolling stock standard specifications for freight cars have received 
the most attention, and standards have been adopted for box cars, 
flat cars, and gondolas. Standard clearances also have been put 
into effect. 

But the subject which has been longest under consideration and 
is probably most nearly complete is that of standard accounts. As 
early as 1915 uniform classifications were promulgated covering 
capital, revenues, expenses, income, profit and loss, and balance 
sheet accounts, together with rules for train and locomotive kilo- 
metrage. A system of annual rej)orts was also installed and five 
such annual reports covering the financial and physical operations 
of all the Government railwaj^s have been issued, while a sixth will 
shortly appear. In the meantime, also, uniform accounts for sta- 
tions, for stores, and for construction engineering have been adopted. 
Workshop accounts and fuel efficiency accounts are next on the 
program for consideration. 

It is too early to appraise fully the value of this work toward 
standard administration. The United States and Japan are both 
familiar with the necessity of and with the great economies which 
result from the integrating of several railway lines into a single 
system. The results which have been obtained in Japan and America 
will certainly find their counterpart in China, Splendid as has 
been the financial and physical performances of the Chinese rail- 
ways when compared with the railways of other countries, these per- 
formances are sure to be improved as administrative standardiza- 
tion proceeds. The Chinese delegation, therefore, denies the in- 
sinuation of inefficiency which has been made against Chinese man- j 
agement. It can only believe that the insinuation was made with- 
out a fiill knowledge of the facts, and especially without a knowledge 
of the vigor with which Chinese management has revised and im- 
proved the instruments of administration. 

Only when the best Japanese railways are compared with the worst 
Chinese railways doe§ any advantage to the Japanese appear. There 
is every reason for the Chinese to wish to make the Shantung Eail- 
way prosper. For every Japanese whom it serves, hundreds and 
thousands of Chinese are served. Its profits would go to the credit 
of the Chinese railway treasury. Besides, in view of the statements 
which have been made in this conference, the Chinese management 
would conceive it to be somewhat under challenge, and accordingly 
be inspired to make a showing even better than that to which their 
ordinary energies would attain. The Chinese also are not un- 



188 

mindful that their stewardship upon this railway will be watched 
in other quarters where other railways similarly situated are con- 
cerned. More than the mere dollars and cents are involved, and the 
satisfaction of forei<^ners of more than one nationality is at stake. 
Hence, the interest of the Japanese nationals as creditors, as shippers, 
as purchasers of commodities produced in Shantung, or as sellers of 
Japanese commodities sold in Shantung will be adequately pro- 
tected wlien that railway is under Chinese management. It is not 
too much to say that the satisfaction of Chinese aspirations in this 
particular is fundamental to any betterment in the relations between 
China and Japan. 

Annex II. 

January 4, 1922. 
[For the press.] 

Issued hy the Chinese and Japanese delegations. 

The Japanese delegation having received instructions from Tokyo 
on the subject of the Shantung Railway, the Chinese- Japanese con- 
versations relating to the Shantung question were resumed at 5 p. m., 
Wednesday, January 4, 1922, in the Governing board room of the 
Pan American Union Building. The meeting adjourned at 7 o'clock 
p. m. until to-morrow, when discussions will be continued. 



NINETEENTH MEETING, 



The nineteenth meeting, held in governing board room, the Pan 
American Union Building, Washington, D. C., at 5.30 o'clock in the 
afternoon of Thursday, January 5, 1922. 

PRESENT. 

China.— Dt. Sao-Ke Alfred Sze, Dr. V. K. Wellington Koo, Dr. 
Chung Hui Wang. Secretaries : Mr. T. Y. Tsai, Mr. T. F. Hsu, Mr. 
C. H. Zee, Mr. Chuan Chao, Mr. T. H. Koo. 

Japan. — Baron K. Shidehara, Mr. M. Hanihara, Mr. K. Debuchi. 
Secretaries: Mr. S. Saburi, Mr. E. Kimura, Mr. H. Saito, Mr. T. 
Shiratori, Mr. K. Kanai. 

Also present as observers: 

The United States of America. — Mr. John Van A. MacMurray, 
Mr. Edward Bell. 

The BHtish Empire. — The Eight Hon. Sir John Jordan, G. C. I. 
E., K. C. B., G. C. M. G. ; Mr. M. W. Lampson^ M. V. O. 

THE RAILWAT QTJESTION. 

Dr. Koo said that at the end of the last meeting he believed both 
the Japanese and Chinese delegates had expressed their hope that 
the plan proposed by each side should be considered overnight by 
the other, in order to see whether any way might be found to bridge 
over the difficulties. The Chinese delegates, on their side, had given 
very careful consideration to the Japanese proposition. They were, 



189 

however, not able to see any way in which they could overcome 
the difficulties which confronted them in accepting the Japanese 
offer as a basis of the discussion. That might be very disappointing 
to the Japanese delegates. However, if the Chinese delegates de- 
clined to entertain the Japanese views, it was only because they did 
not see their way clear to adopt any other way. On the other hand, 
they were very anxious to bring the discussion to an early close, and 
so they now wished to make further concessions on their alternative 
plans in the hope that the Japanese delegates might find the Chinese 
proposal more acceptable than it had originally stood. With refer- 
ence to the method of cash payment, the Japanese delegates had 
desired, at one of the previous meetings, that a single deposit should 
be made instead of three deposits to be spread over nine months 
in which the transfer of the railway properties was to be com- 
pleted. If the cash payment was more acceptable to the Japanese 
delegates, the Chinese delegates would be ready to accept the plan ' 
of one single deposit on a specific date, leaving Japan to decide i 
whether it should be made before, or at the time, the transfer of the 
railway was begun. On the other hand, 'if the Japanese delegates 
still found the cash payment unacceptable, the Chinese delegates 
would be ready to make a further concession on the plan of the de- 
ferred payment, substituting another kind of security for the treas- 
ury notes. This new security was the notes of Chinese bankers. With 
these two further colTcessions, the Chinese delegates hoped that the 
Japanese delegates would find the two Chinese alternative plans 
more acceptable. He hoped that the Japanese delegates would 
cooperate with the Chinese delegates to expedite a satisfactory 
agreement on the railway question. 

Baron Shidehara said that Dr. Koo had just referred to the diffi- 
culties on the Chinese side to agree to the railway loan agreement. 
He would like to hear his explanation in a few wprds as to these 
difficulties. 

Dr. Koo said that he had tried yesterday and on previous occasions 
to make clear the various difficulties which stood in the way of the 
Chinese delegates, but he would be glad to recapitulate briefly the 
reasons which the Chinese delegates had for maintaining their posi- 
tion on the question of the railway. In the first place, the Chinese 
delegates could not hope successfully to explain away to the people 
at home why China should accept the Japanese loan when China's 
own bankers had offered to provide the necessary funds. In the 
second place, the present Shantung Railway question was one differ- 
ent from that of an ordinary railway loan. Heretofore such loans 
had been contracted for the actual construction of a new line, but 
in the present case the railway had actually been in operation for 
many years. The reasons which had given rise to other loan agree- , 
ments did not exist in this case. To entertain such a course as sug- 
gested by the Japanese delegates would neither be wise nor necessary. 
In the third place, not only the Chinese delegates, personally, were 
unable to see the wisdom of accepting a Japanese loan as the best 
means for payment, but the instructions from the Chinese Govern- 
ment had made it perfectly clear that he and his colleagues ought 
not to go beyond the two Chinese alternative plans. In the fourth 
place, the idea of the Japanese loan would not be wise, because it 
93042—22 13 



190 

would give rise to misgivings in China. By tlie settlement of the 
Shantung question it was hoped to remove all causes of mis<nvings 
which had stood in the way of friendly relations between the two 
countries. Briefly, these were the reasons upon which the Cliinese 
delegates placed their point of view. They therefore urged that 
the Japanese delegates would consider the Chinese alternative plans. 
They would be glad to hear from the Japanese delegates any ob- 
jections to any feature of the plans the Chinese delegates had just 
suggested. 

Baron Shidehara said that he should also be very brief. Dr. Koo 
had stated that in the first place it would be difficult on the part of 
the Chinese delegates to explain to the Chinese people. It appeared 
to him that there were very good reasons for them. The Shantung 
matter had a long history. Japan had made concessions repeatedly 
in meeting the Chinese wishes. The original position Japan had 
taken had been, as would very well be remembered, that Japan was 
entitled to the full ownership and operation of the railway, but since 
the Paris peace conference repeated concessions had been made. The 
loan agreement plan was the last compromise on Japan's side. Unless 
both the delegations were able to make compromise on each side, the 
question would never be brought to a satisfactory close. If the Chinese 
delegates would explain the whole history, it would not be difficult 
to convince the Chinese people of the reasonableness of the Japanese 
attitude. Secondly, as to the difference betAveen the Shantung and 
other railways, he knew that there was a difference, but that dif- 
ference tended to show that the Japanese proposal was quite a modest 
plan. The railway properties had never been China's properties, 
and now Japan was ready to hand it over to China, and in handing 
it over was ready to discuss the terms. It was true that the rail- 
Avay had already been constructed, but it was in the Japanese hands. 
The difference, if any, would support rather than operate against 
the Japanese proposition. In the third place. Dr. Koo had spoken 
'of the instructions from the Chinese Government. However, the 
'instructions received by the Japanese delegates were also quite ex- 
plicit. They were not authorized to proceed any further than the 
.railway loan agreement plan. In the fourth place, as to the mis- 
understanding likely to be generated among the Chinese people if 
the loan plan was to be agreed to, he would say that the same dif- 
ficulty existed on the Japanese side if the Japanese delegates were 
to accept one of the Chinese alternative plans. As he had stated on 
several occasions, the Japanese people would raise the question why 
the Japanese capitalists should be placed in a less favorable position 
than that allowed to other nationals in relation to the Chinese rail- 
ways. 

In an}?^ case, the point at issue was this : Japan had proposed the plan 
of the railway loan agreement under which the Japanese capitalists 
would be made creditors of China. On the other hand, the Chinese 
delegates had offered the plan of a deferred payment under which 
the .Japanese (xovernment itself would be made the creditor. The 
Chinese delegates had observed the day before that the difference 
between the Japanese and Chinese proposals was merely a matter 
of form. He was not quite sure about that. He wondered whether 
something more than the question of form was not involved in the 
issue. To be quite frank, the Japanese delegates were naturally 



191 ''■■ '-'''^' - ■ M 

apprehensive that if the plan of deferred payment Avere to be ac- 
cepted, Japan might be placed in a substantially weaker position 
than that which she would have been able to take under the ordinary 
railway loan plan, when she proceeded to the discussion of the con- 
crete terms of the proposed financial arrangement. It might well 
be contended that Japan, by agreeing to the plan of the deferred 
payment, had practically agreed to adopt as the basis of the terms 
of the proposed financial arrangement the plans which were sub- 
stantially different from those that were generally found in a great 
many cases of ordinary loan agreements. What the Japanese dele- 
gates would like to make clear Avas this, whether in the contempla- 
tion of the Chinese delegation the point at issue was simply a question 
of form, consisting only in the question as to who w^ere to be made 
the parties to the financial agreement, or Avhether it Avas intended that 
such difference should affect the actual terms of the proposed ar- 
rangements. If, as Avas apparently presumed by the Chinese dele- 
gates, the question was merelj^ a matter of form, then the question 
Avoulcl be reduced to the mere question of financial technicality, but 
if it Avas more than a mere matter of form, then the Japanese dele- 
gates would be confronted with a great difficulty in accepting such 
an arrangement. He therefore would like to know the exact views of 
the Chinese delegates in regard to the point at issue. 

Dr. Koo said that he Avished to make a few obserA'ations before he 
tried to ansAver Baron Shidehara's question. Baron Shidehara inti- 
mated that if the deferred-payment plan Avas accepted it would give 
the impression to the Japanese people that a different treatment had 
been meted out to them compared with other nationals. HoAvever, 
such AA^oulcl not be the case. Chinese bankers Avere to provide the 
money. Only when financiers of some other nationality Avere asked to 
finance the raihvay properties, the question of an unfavorable treat- 
ment Avould arise. As regards Baron Shidehara's apprehension, that 
Japan would find herself in a weaker position than other countries 
interested which were creditors of China in certain raihvay loans, 
that was again a Adew which was not altogether corresponding Avith 
the actual situation. In the case of ordinary loans for financing the 
construction of a neAv line, the bankers could not tell whether, or how 
soon, they could expect sufficient rcA^enue from the railway. For that 
reason considerations had to be given Avith a Adew to safeguard the 
foreign iuA^estments. In the present case the situation was entirely 
different, and therefore the method of paying by treasury notes had 
been advanced. It was now offered that even bankers' notes Avould 
be issued on the security of the revenue of the line. The earning 
capacity of the Shantung Railway was knoAvn to be A^ery great. 
Therefore there was not the same risk as Avas assumed by bankers of 
any country in contracting neAV loans. Baron Shidehara further 
seemed to fear that if Japan accepted the deferred payment plan it 
might giA'^e less faA^orable terms to Japan than under ordiaiary loans. 
That, again, was a point about which the Chinese delegates differed 
with Baron Shidehara. The Shantung Railway stood in a class of 
its owm. If Baron Shidehara apprehended that the arrangement 
would be taken as a precedent for future negotiations or for outstand- 
ing loan negotiations, the Chinese delegates would find no difficulty 
in giving assurances to the Japanese delegates on that point. Now, 



192 

before answering the questioin as to whether the difference was merely 
one of form, he desired to know what was preciselj^ in the mind of 
Baron Shidehara in putting him that question. He wanted to be 
informed especially whether it was the idea of the Japanese delegates 
that they would accept the plan of deferred payment or treasury 
lUotes, provided, generally speaking, the same terms as under ordi- 
nary loan agreements were to be given. 

Baron Shidehara said that the point at issue was whether deferred 
payment or loan should be accepted. He remembered that yesterday 
Dr. Koo had stated that the difference was only in form. What he 
feared was that the difference was somethi/ng more than a mere matter 
of form. If the Japanese delegates accepted the Chinese plan of 
deferred payment, they would in any case have to adjust the terms of 
the financial arrangement ; and when they proceeded to negotiate the 
precise terms of the arrangement, China might say that that was not 
a loan agreement and insist upon entirely different terms from what 
were found in general in a loan agreement. He therefore wanted to 
ascertain whether it was simply a matter of form, in which case the 
question seemed to be an easy one. If, however, that was not the case, 
then a question very; difficult to adjust would present itself. There 
was still another point on which he desired to be enlightened. Dr. 
Koo had said that the revised plan to make payment by Chinese bank- 
ers' notes was a concession on China's part. He could not see why 
that was a concession. 

Ur. Koo said that the new notes werp bankers' notes, a;nd not an 
ordinary merchant's notes. As the treasury notes had been found 
unacceptable to the Japanese delegates, he and his colleagues had 
tried to meet them with this new plan. 

Baron Shidehara asked if that implied any concession on the part 
of China. He did not think it made any difference to China whether 
the payment was made in treasury notes or in the notes of Chinese 
bankers. 

Dr. Koo said that he had understood that there was difficulty for 
Japan to take treasury notes, so the Chinese delegates offered 
bankers' notes. It did not mean that they had withdrawn the plan 
of treasury notes. 

Mr. Hanihara said that he might be permitted to say a few words 
to make clear the meaning of the railway-loan agreement, about 
which he thought there was some misapprehension on the part of the 
Chinese delegates. They had said that they could not accept a 
Japanese loan as a means of payment of the price of the railway, but 
it was not a question of paying the price of the railway. The rail- 
way-loan plan had been offered as a concession by Japan in this 
sense that while Japan's original plan had been to make the railway 
into a joint enterprise, in deference to the wish of the Chinese Gov- 
ernment and people, Japan had taken a step further and offered to 
hand over the title to the railway to China. She had never proposed 
to sell it to China, but to transfer it to China in such form that she 
might retain certain interest in the railway to which she still be- 
lieved she was entitled. The question was not, therefore, one of how 
to provide money for the payment of the railway. He wondered if 
the Chinese delegates had noticed that difference. 

Dr. Sze said that the Chinese people wanted control, clear and 
indisputable control, over the railway. That was the underlying 



193 

motive of the Chinese delegates in desiring a clear settlement. If 
Japan were still to retain half or part control of the railway, such 
a settlement could never be acquiesced in by the Chinese people. 
That was exactly what the Chinese delegates wished to avoid. 

Dr. Koo said he hoped the Chinese position had been made clear. 
The subject matter clearly ought to be called a debt. The idea of 
loan was not, therefore, fit to be taken as a basis of discussion because 
the question was a liquidation of a debt. In order to meet the 
Japanese wish to retain interest in the railway, the Chinese delegates 
haci offered to nominate a Japanese national as district engineer of 
the railway. While that might not be entirely satisfactory to the 
Japanese delegates, he hoped they would regard it as* an important 
interest. 

Baron Shidehara said that in order to prevent the possibility of 
misunderstanding, he wanted to make it clear that he had not in- 
timated anything in the sense of accepting the Chinese plan of 
deferred payment. He had merely asked whether under their plan 
of deferred payment the Chinese delegates were ready to accept the 
terms of an ordinary loan agreement. He did not want, in asking 
that question, to convey any idea that he intimated inclination to 
accept the Chinese plan, which he and his colleagues could not do 
under the instructions they had. 

Dr. Koo said that he had been vaguely hoping, after listening to 
Baron Shidehara's observations, that the Japanese delegates might 
see their way not to insist upon the plan of a Japanese loan agree- 
ment, but the statement Baron Shidehara had just made seemed to 
dissipate any hope he had entertained. Still he was not sure if he 
really understood clearly the present position of the Japanese dele- 
gates. Should it be their position that they could not agree to eitiier 
of the Chinese alternative plans upon which further concessions had 
been made to render them more acceptable, he must express deep 
regret because he felt that he and his colleagues had exhausted their 
ingenuity in finding ways and means to meet the Japanese desire. 
Before stating the Chinese position definitely he would like to have 
a clear statement if his Japanese friends really considered neither 
of the Chinese plans as acceptable to them in principle. 

Baron Shidehara said that the Japanese position was that neither 
of the Chinese alternative plans in their present form was acceptable 
to the Japanese delegates. They were compelled under instructions 
from home to hold to the plan of the railway loan agreement. It was 
not, however, quite clear to him what Dr. Koo had in mind as to the 
difference between deferred payment and loan. He wondered if Dr. 
Koo still considered the difference as a question of form only. 

Dr. Koo said that in reply to that question he would say on behalf 
of the Chinese delegation that if the Japanese delegates found neither 
of the two alternative plans acceptable to them in their present form, 
the Chinese delegates would be disposed to consider in what respect 
their plans could be modified. They would be glad to consider Japa- 
nese suggestions along that line, provided the.y could understand that 
these plans would be taken as a basis of settlement. If, on the other 
hand, the Japanese delegates felt it necessary to insist upon a plan 
based on Japanese loan, then he should hesitate to proceed to consider 
modifications of either of the Chinese plans, lest at the end of the dis- 



194 

cussion the Chinese delegates should still find themselves where they 
had stood at first, as had been the case before. He did not, of course, 
attribute the delay in progress principally to the Japanese side. He 
merely urged the desirability of making speedy progress. 

Baron Shidehara .said that he had not yet received a very clear 
answer to the question he had asked. He had asked Dr. Koo whether 
he considered the difference between the Chinese and Japanese pro- 
posals simply as a matter of form, or whether it was his intention to 
say that the Chinese delegates would be ready to accept in substance 
the terms of the raihvay loan agreement. 

Dr. Koo said that in answer to that question he wished to say that 
if the Japanese delegates would be prepared to waive the idea of the 
Japanese loan the Chinese delegates would be ready to consider any 
suggestions on the basis of the plan of deferred payment in general 
harmony Avith the substance of the existing railway loan agreements, 
but without taking the form of a loan and within the limits of keep- 
ing the railway under full Chinese control, operation, and manage- 
ment, as Baron Shidehara had stated to be his desire on more than 
one occasion. 

Baron Shidehara said he was afraid he could not entertain much 
hope that the Japanese GoA-ernment would consent to give up the plan 
or railway-loan agreement ; but the question with which he was con- 
fronted was a very difficult one; he Avould wish that the meeting 
might adjourn in order that the proposition might be considered 
overnight. 

Dr. Koo said he hoped what Baron Shidehara had just stated 
merely represented apprehension on his part. If the Japanese dele- 
gates should still consider as unacceptable this new suggestion, which 
had been made in all sincerity on the part of the Chinese delegates to 
meet the Japanese desire, he had to (luestion himself whether some 
other means of reaching a settlement should not be sought. Since 
yesterday's meeting he and his colleagues had sriven much considera- 
tion to the Japanese position and their own position, and in order 
that the}^ might not expose themselves to any criticism that they had 
resorted to other methods than these conversations, they had really 
strained themselves to find a way to meet the Japanese viewpoint. It 
was for that purpose that further concessions such as he had stated 
before, both in regard to the plan of cash payment and to that of 
deferred payment, had been made. The Japanese delegates on their 
part seemed to have some difficulty to accept these plans without in- 
corporating some of the substance of the terms of the existing railway 
loan agreements in the Chinese plan of deferred payment. The Chi- 
nese delegates had gone out of their way to adopt the formula which 
he had just read. If that was still unacceptable he could not but feel 
that he and his colleagues owed it to themselves to seek some other 
means of reconciling the difference of views between the two delega- 
tions. He did not know whether the Japanese delegates were equally 
disposed to solicit the aid and friendly offices which Messrs. Hughes 
and Balfour had been good enough to offer both delegations, in the 
hope that they might be able to suggest some new way out of the 
difficult position in which the two delegations found themselves, so 
that the discussion might be settled without unnecessary delay. 

Baron Shidehara said that Dr. Koo had put to him an entirely 
new question, which he felt it difficult to answer offliand. He 



195 

hoped that the Chinese delegates would rea,lize the position of the 
Japanese deleoates. He had, of coarse, no knowledge of what in- \ 
stnictions his Chinese colleagues had received from home. On the j 
part of the Japanese delegates, however, instructions were quite j 
explicit. Thej^ had to insist upon the plan of railway loan agree- j 
ment, and anything that fell short of that plan was very difficult j| 
for them to accept. 

Dr. Sze said that the whole idea of the Chinese delegates was 
to expedite the matter. They had been making concessions one 
after another. To-day they had again made repeated concessions. 
They had gone to the utmost limit. If their last proposal was still 
unacceptable there was nothing left for them but to ask the good 
offices of Messrs. Hughes and Balfour. It would be necessary to 
give them time. Unless the Japanese delegates thought that the 
Chinese proposal could form the basis of settlement, no useful pur- 
pose would be served by causing further delay. The delay of more 
than two weeks had already given bad impression outside. 

Baron Shidehara said that he did not wish to repeat what he 
had already said, but to be perfectly frank, he did not understand 
how the revised Chinese plan could in any way be considered as 
a concession on the part of China. In the instance of cash pay- 
ment it had been proposed that the whole amount should be de- 
posited, but no definite period for the deposit had been given. As 
for the plan of deferred payment, the Chinese delegates had simplj?- 
offered bankers' notes instead of treasury notes. He did not see 
how that could make any difference to China. 

Dr. Koo asked whether the Chinese delegates were then to under- 
stand that the Japanese delegates were not able to consider the 
formula just proposed. 

Baron Shidehara replied that he had said he would consider that 
formula overnight. In saying so he did not mean that the Japanese 
•delegates would be ready to accept it. 

Dr. Koo asked if it was Baron Shidehara's idea that he did not 
wish to express opinion now, but that he wanted to study it first. 

Baron Shidehara answered in the affirmative. 

Dr. Sze said that the Chinese delegates wished a speedy solution. 

Baron Shidehara said that the Japanese delegates entertained the 
same wish. 

The press communique was issued (Annex I). 

Adjourned at 8 o'clock p. m. until 3 o'clock, January 6, 1922. 

Japanese Delegation, 

Washington, D, C, January 5, 1922. , ^ 

SJC-19.] 

Annex I. 

January 5, 1922. 
[For the press.] 

Issued hy the Chinese and Japanese delegations. 
The nineteenth meeting of the Chinese and Japanese delegates on 
the subject of the Shantung question was held in the governing 
board room of the Pan American Union Building on Thursday 
afternoon, January 5, 1922, at 5.30 o'clock. The discussion on the 
Shantung Railway was continued. The meeting adjourned at 8 
o'clock until 3 o'clock to-morrow afternoon. 



196 

'3;WENTIETH MEETING. 

The twentieth meeting, held in governing board room, the Pan 
American Union Building, Washinton, D. C, at 3 o'clock in the 
afternoon of Friday, January 6, 1922. 

PRESENT. 

China.— T>r. Sao-Ko Alfred Sze, Dr. V. K. Wellington Koo, Dr. 
Chung Hui Wang. Secretaries: Mr. T. Y. Tsai, Mr. T. F. Hsu, 
Mr. C. H. Zee, Mr. Chuan Chao, Mr. T. H. Koo. 

Japan. — Baron K. Shidehara, Mr. M. Hanihara, Mr. K. Debuchi. 
Secretaries: Mr. S. Saburi, Mr E. Kimura, Mr. H. Saito, Mr. K. 
Kanai, Mr. T. Shiratori. 

Also present as observers : 

The United States of America.^ -M.t. John Van A. MacMurray, 
Mr. Edward Bell. 

The British Empire. — The Right Hon. Sir John Jordan, G. C. 
I. E., K. C. B., G. C. M. G.; Mr. M. W. Lampson, M. V. O. 

Baron Shidehara said that the Japanese delegates had given very 
serious consideration to the Chinese proposal made at the meeting 
of the day before and they had been compelled, with much reluctance, 
to state once more that, consistently with the terms of the instruc- 
tions from Tokj^o, they did not see how they could find their way 
to agree to any plan falling short of the plan of the ordinary rail- 
way loan agreement. Thej^ had repeatedly explained that the only 
plan which Japan could possibly accept as a substitute for the Jap- 
anese original plan of joint enterprise was the plan of a railway 
loan agreement on the basis of terms of similar agreements which 
China had concluded with various foreign nationals in recent years, 
sa}^ 1913 to 1914. In order to present the Japanese position in a 
more concrete form he would propose as the terms of arrangement 
the following: 

"(1) The period for which the loan was to run should be fixed at 
15 years, while China should have an option for redeeming the out- 
standing liability, upon six months' notice, after five years from the 
date of the agreement. 

" (2) A Japanese traffic manager and chief accountant should 
be engaged in the service of the Shantung Railway. 

" (3) The details of the final arrangement should be worked out 
later on at Peking between the representatives of the two parties to 
the agreement." 

It would be observed that the terms now offered were decidedly 
more favorable to China than in the case of similar agreements 
which China had entered into with various foreign capitalists 
in recent years. The Japanese delegates sincerely hoped that those 
terms would commend themselves to the serious reconsideration of 
the Chinese delegates. 

The Chinese delegates had further proposed the day before that 
the good offices of Mr. Hughes and Mr. Balfour might be asked for 
the settlement of the pending difficulties. While, of course, placing 
utmost confidence in the judgment of these statesmen, he would 
like to say that the terms of the telegraphic communications from 



197 

Tokyo, instructing the Japanese delegates to maintain the plan of 
the loan agreement, were quit« explicit and that in the present situa- 
tion the Japanese delegates were not in a position to agree to ask 
for the American and British good offices as proposed by the Chinese 
delegates on the previous day. 

Dr. Koo said that he and his colleagues had. listened to the state- 
ment of Baron Shidehara with great attention. Thej' could not con- 
ceal their sentiment of deep regret that after so many meetings and 
such long discussions the Japanese delegates should revert to the 
question of the Japanese loan. He recalled that when first the Japa- 
nese delegates had brought up this aspect of the railway question 
he hoped the Chinese delegates had made clear the reasons why they 
could not make it the basis of discussion. The Japanese delegates 
were good enough to indicate their willingness to proceed on the 
basis of the two alternative plans proposed by the Chinese delegates. 
It would be recalled by the Japanese delegates also that it was at 
least under that impression, to put it mildly, that both delegations 
had devoted several meetings to the exchange of views on the details 
of the two Chinese proposals. Now, at this last stage of their con- 
versations on this question, the Japanese delegates desired to insist 
upon a proposition which was really, to use a metaphorical expres- 
sion, a yirgin soil. A great deal of labor had been spent on the two 
alternative plans proposed by China, and the Chinese delegates had 
been hoping all along that much progress had been made, when the 
Japanese delegates abruptly insisted upon reverting to the Japanese 
loan plan, which had been but lightly touched upon before. Of 
the two Chinese plans, the first proposition was that of a cash pay- 
ment. However, since the Japanese delegates had manifested great 
difficulty in accepting that plan, though not clearly stating so, the 
Chinese delegates had offered the plan of deferred payment. That 
had been offered because the Japanese delegates had expressed a de- 
sire to retain a certain interest in the railway. It would be hardly 
necessary to retrace all the ground covered, or to recount all the con- 
cessions made by the Chinese delegates step by step, in either of the 
two plans to meet the Japanese point of view. As late as the day 
before, after offering further concessions in respect of the two Chi- 
nese plans, the Chinese delegates had gone out of their way to try to 
meet the Japanese point of view by submitting a formula drafted 
solely from the desire to meet the Japanese wishes in the matter of 
incorporating, in a general way, the substance of existing railway 
loan agreements in the settlement of the railway question. Since 
yesterday the JajDanese delegates had not only made no conces- 
sions on the stand taken by them on December 20, but the Chinese 
delegates felt that the present Japanese proposition was in reality 
a step backward. It carried the two delegations further apart. In 
view of Japan's inability to accept the formula which the Chinese 
delegates had offered reluctantly, the latter felt constrained to with- 
draw that formula. The Chinese delegates would therefore state 
again that the two plans offered were still open for the acceptance 
by Japan, namely, the plan of cash payment with a single deposit or 
the plan of deferred paj^ment, in Chinese bankers' notes, extending 
over the period of 12 years with an option upon six months' notice 
to pay all remaining liabilities after three years, with the under- 



198 

taking by China to appoint a Japanese district engineer for the 
period the loan remained unpaid. 

As regarded Baron Shideiiara's observations concerning the uti- 
lization of the good offices of Mr. Balfour and Mr. Hughes, he was 
not sure whether he understood Baron Shidehara correctly. He 
trusted that it was not Baron Shidehara's idea to intimate that the 
good offices of Mr. Balfour and Mr. Hughes should not be utilized 
at any stage of their conversations. He understood that it was the 
baron's idea that the good offices need not be availed of at the pres- 
ent moment. So far as the Chinese delegates were concerned, they 
desired to make as rapid a progress as possible, and in fairness to 
themseh'es and as a token of appreciation toward those two gentle- 
men who had offered their good offices on behalf of their respective 
(Tovernments the Chinese delegates had no hesitation in inviting 
their good offices and in asking them to extend to the two delegations 
such assistance as might be useful for the progress of these conversa- 
tions. Unless, however, he had misunderstood Baron Shidehara's 
observations on that point he did not wish to propose to refer to 
the exact situation with reference to the acceptance upon both sides 
of the friendly offers made by both Mr. Hughes and Mr. Balfour. 

Baron Shidehara said that he remembered that before the two 
delegations had adjourned on December 20 there had been much dis- 
cussion on the railway loan agreement as well as on the two Chinese 
alternative plans. He remembered that the Chinese delegates had 
not found it j^ossible to accept the Japanese proposition, but that, on 
the other hand, the Japanese delegates had not been able to accept 
either of the alternative plans proposed by the Chinese delegation. 
In that situation the Japanese delegates had had to refer the whole 
matter to the Tokyo Government and to wait upon their instruc- 
tions. The conversations had been resumed three days before: as 
instructions had just then been received and as, it would be remem- 
bered, the instructions had opened a new phase in the situation. 
Formerly the railway loan plan had not been discussed as a plan of 
the Japanese Government, but after the receipt of instructions from 
Tokyo the Japanese delegates had submitted that plan as the plan 
of the Japanese Government. Naturally, as Japanese delegates, he 
and his colleagues had to act under instructions. With regard to 
the latter part of Dr. Koo's remarks, he was not quite able to follow 
the meaning of the observations made. Dr. Koo had said that Mr. 
Hughes and Mr. Balfour had offered good offices. Was it his mean- 
ing that these conversations had been opened through their good 
offices, or that after this difficult stage had been reached they had 
newly offered good offices? 

Dr. Koo said that on that point the Chinese understanding was 
that the offer of Mr. Hughes and Mr. Balfour was a continuing one^ 
The good offices would have been of very limited usefulness were 
they not of a continuing character. If there were any doubt at all, 
the best way to clear it would perhaps be to read from the record of 
the present conversations prepared by the Japanese secretaries 
passages upon what those statesmen had said at the opening session. 
The Japanese minutes on December 1 read as follows : 

" He (Mr. Balfour) added that he had full confidence that the 
representatives of the two powers would come to an agreement on 



199 

the Shantung question, so important not only to the countries imme- 
diately concerned but to the whole world. He joined Mr. Hughes in j 
saying that in the course of the conversations, if any circumstances ' 
should come to pass which called for friendly intervention on his 
part, it would be his great pleasure to offer his services. He was in i 
that connection entirely at the disposal of Mr. Hughes and the rep- 
resentatives of Japan and China." 

Mr. Hughes also had said that he — 

'' Was gratified to receive assurances from both delegations that 
the conversations would be continued in the most friendly manner. 
He was in full accord with Mr. Balfour in offering his services 1 
whenever needed." I 

He thought that on that point the records were so very clear. 
What he (Dr. Koo) had said was that if Baron Shidehara, while 
not opposing the idea of asking good offices, merely considered the 
present moment not opportune to resort to that means, the Chinese 
delegates would not' press to refer the exact situation to Messrs. 
Hughes and Balfour. The very fact, however, that the four gentle- 
men had been assisting at every session as their representatives was 
a clear indication of the intentions of Mr. Balfour and Mr. Hughes. 

Baron Shidehara said that it had not been quite clear to him 
whether there had been any new offer for good offices from those 
two statesmen, but now the situation had been made very clear. 

Dr. Koo said that such new offer was not necessary so long as the 
original offer of good offices had been in the nature of a standing one. 

Baron Shidehara said that with regard to the question of the 
good offices he thought that the Japanese delegates had made their 
position sufficiently clear. He had stated that the instructions 
received from Japan were quite explicit in directing them to main- 
tain the plan of railway loan. In the present situation, therefore, 
the Japanese delegates were not in a position to request the good 
offices of Mr. Hughes and Mr. Balfour. He should like to ask I 
whether the Chinese delegates did not think it worth while to { 
discuss the terms of arrangement proposed by the Japanese dele- j 
gates that day or even to refer them to Peking for consideration. 

Dr. Koo said that he did not quite understand the purpose of 
Baron Shidehara's intimation for the Chinese delegates to refer to 
Peking. He hoped they had made it quite clear that the instruc- 
tions in their hands did not permit the Chinese delegates to accept 
the plan of the loan agreement. He did not know if the recent visit 
of the Japanese minister at Peking, first to the Chinese minister of 
foreign affairs and then to the premier, had not given the Japanese 
delegation an impression which, from the point of view of the Chinese 
delegation was, perhaps, a misimpression. Since the Chinese dele- 
gates had made a statement concerning their authorization they had 
received further communications from Peking making it perfectly 
clear that the idea of the plan of the Japanese loan was not ac- 
ceptable to the Chinese Government any more than to the delegation 
here. Without wishing unnecessarily to interest the Japanese dele- 
gates in Chinese politics, he might add that this recent instruction 
of the Chinese Government renewing their confirmation of the views 
of the Chinese delegates in the matter had been given after the 
formal cabinet meeting, which had been going on during the last 



200 

! few days. He should like to know if, on one hand, the Japanese 
' delegates rejected both of the Chinese alternative plans and insisted 
upon the Japanese loan plan; and, on the other hand, even though 
the difficulty was so apparent, they still did not see their way to 
utilize the good offices of Messrs. Hughes and Balfour, how, then^ 
did the Japanese delegates i)ropose to settle the question ? 

Baron Shidehara said that in the first place it was not his intention 
to request reference to Peking. He had simply put the question if 
the Chinese delegates did not think it worth while to refer to Peking. 
He now found that the two delegations had definite instructions from 
their respective Governments. The Japanese delegates could not 
accept the two Chinese alternative plans, and the Chinese delegates, 
in turn, could not accept the Japanese plan of loan agreement. That 
was the situation they were now confronted with, and he really did 
not know, just at present, how that difficulty could be adjusted. He 
added that he, nevertheless, did not abandon the hope that the two 
delegations might be able to come to some understanding on that 
difficult question. He would ask whether the Chinese delegates did 
not think it would be useful to meet again on Monday. 

Dr. Koo said that he hoped that it was not Baron Shidehara's pur- 
pose unnecessarily to protract the conversations. He took it that the 
flapanese delegates were aware that the labors of the Avhole con- 
ference were approaching their end. He presumed that it was the 
Japanese desire, as well as the Chinese, that a settlement of the 
Shantung question should not be delayed. The Chinese delegates 
liad tried to suggest various ways of meeting the difficulties con- 
fronting the two delegations, and they had made concessions, one 
after another, in both plans they had proposed. However, neither of 
them being found acceptable to the Japanese delegates, they had pro- 
posed to utilize the good offices of Messrs. Hughes and Balfour, be- 
cause they might, perhaps, indicate some new point of view which 
had escaped both the Japanese and the Chinese delegation. The Chi- 
nese delegates had received no new instructions which were not in 
the nature of confirming the position they had taken from the very 
outset. In the circumstances it would perhaps be the most advisable 
course for both the delegations to take, if they were to avail themselves 
of the good offices which Messrs. Hughes and Balfour had offered 
to both delegations. If the Japanese delegation was still disinclined 
to refer the matter to Messrs. Hughes and Balfour, the Chinese dele- 
gates might perhaps modify the course somewhat by inviting those 
two statesmen to join the two delegations in the conversations which 
really should not take place later than to-morrow. 

Dr. Sze said that it would be recalled that yesterday he had pro- 
posedthat the meeting should be held, if not in the morning to-day, 
early in the afternoon, so that they might have time enough to utilize 
the ^ood offices of Messrs. Hughes and Balfour if they consented 
to join them. In view of what Baron Shidehara had just said, he 
would suggest that the meeting should be held to-morrow. 

Baron Shidehara said that it was certainly not his intention to pro- 
tract the conversations. He was sure the Chinese delegates would 
realize that the Japanese delegates had been doing their best to expe- 
dite settlement of the question, but the fact was that the Chinese 
delegates had definite instructions and the Japanese had instructions 



201 

equally definite, and neither of them could proceed any further. As 
he had stated, therefore, they were not in a position at present to re- 
quest the good offices of the two statesmen. He thought, neverthe- 
less, it might be useful for the two delegations to meet next Monday. 

Dr. Sze said that, clearly, the Japanese delegates would not avail 
themselves of the good offices of Messrs. Hughes and Balfour. 

Baron Shidehara said that, as he had stated, the instructions from 
the Tokio Government were explicit and the Japanese delegates were, 
in the present situation, not in a position to ask for the good offices 
of Messrs. Balfour and Hughes. 

Dr. Sze reminded Baron Shidehara that he (Baron Shidehara) 
had not been here at the first few meetings. The minutes for the 
opening session had been read to the baron. The two statesmen had 
not said that the offer of the good offices was not a continuing one. 

Dr. Koo said that he understood that the Japanese instructions 
precluded the acceptance of the Chinese proposals, while the Chinese 
instructions made the acceptance of the Japanese proposal equally 
impossible. Therefore, neither of the delegations could proceed any 
further, there arising a situation amounting to an impasse. It was 
for difficulties of such kind that the good offices had been offered, 
and they could now effectively be utilized, if ever. He was at a loss 
to know how it could be hoped to settle the question if the Japanese 
delegates were not disposed on the one hand to make further con- 
cessions, after the Chinese delegates had made repeated concessions, 
and on the other hand they were not disposed at the present juncture 
to utilize the good offices of Great Britain and the United States. 
When he said that the Japanese delegates were not disposed to make 
any further concession he said so advisedly. Their present position 
was not conciliatory. They had gone back to the position which had 
existed on December 20. The Chinese had come much further from 
the position taken on that date. Therefore, if the Japanese dele- 
gates could not agree to request the good offices of Messrs, Balfour 
and Hughes, he should like to ask whether, if the Chinese delegates,! 
on their part, were to invite those two statesmen to come, the Japa-( 
nese delegates would have any objection to that course. 

Baron Shidehara thought that he had defined the position of the 
Japanese delegates with sufficient clearness. They were at that mo- 
ment not in a position to request the good offices of Messrs. Balfour f 
and Hughes, and without request from both parties he wondered ; 
whether it would be practicable for the two statesmen to join the; 
Japanese and Chinese delegations. 

Dr. Koo said that, nevertheless, if the Japanese delegates had no 
objection to requesting the presence of those two statesmen, they 
might be induced to join the conversations. 

Baron Shidehara said that he had no intention of objecting to 
the coming in of the two statesmen ; only he could not imagine how 
they would come in without the request of the two parties con- 
cerned. 

Dr. Koo said that he need hardly add that those two gentlemen 
were, according to his views, at liberty to come in at any time; The 
four gentlemen actually present here were their personal representa- 
tives, whom they sent because they wanted to see the question settled 
speedily and in a satisfactory manner. If they wished to come of 



202 

their own aceoixl. they ooiUd do so at any time, and the two dele<j:a- 
tions knew that Mr. Balfour had said that he phic-ed <rreat importance 
in the settlement of the question, not only in the interests of the 
parties immediately concerned but in the interests of the whole 
world. He would like to know Avhetlier. if the Chinese delegates in- 
vited the two statesmen to join, the Japanese deleiiates would per- 
sist in their objection. 

Baron Shidehara said that he had no intention of placinfi; obstacles 
in the way of the Chinese dele<rfites extendinir an invitation to the 
two trentlemen. But in the nature of fjood othces. he felt that it 
miofht be awkward for them to come in without the express request 
from both parties. He did not see how that could be done. He hoped 
that the Chinese delegates would not consider him too insistent if 
he said that the two delegations might again meet on next Monday. 

Dr. Sze said that between then and Monday there Avere two days. 
No time should be lost after as many as 14 valuable days had been 
lost. The Japanese delegates no longer objected to the coming in 
of Mr. Hughes and Mr. Balfour to-morrow. Was that the present 
position of the Japanese delegates? 

Baron Shidehara said that the Japanese delegates had certainly 
no objection to their presence. 

IMr. MacMurray said that he Avould suggest that before Mr. Bal- 
four and Mr. Hughes should be asked to attend or formally partici- 
pate in the con^-ersations. the t\K-o sides should take occasion in- 
formally to discuss the matter with those two gentlemen. 

Dr. Sze said that the American and British observers had been tak- 
ing full notes of the jn-oceedings. and Mr. Hughes and Mr. Balfour 
must have been fully informed of tlie progress of the discussions. 

Mr. MacMurray said that they, of course, had been kept informed 
on the conversations, but that after all observers were there in- 
formally. 

Baron Shidehara said that the Japanese delegates were afraid that 
it would be embarrassing to the British and American statesmen. 
They had simply said that they on their part had no objection, but 
without express invitation from })oth. the two statesmen might be 
placed in an awkward position. 

Dr. Sze said that the Chinese desire was to attain a speedy and 
fair settlement of the whole question. If the Japanese delegates 
did not see their way to accept the proposition to resort to the good 
offices of Mr. Hughes and Mr. Balfour, that was another question. 
But the Chinese idea was to ask for their good offices simply in the 
interest of a speedy solution. Nothing was further from the in- 
tention of the Chinese delegates than to embarrass these statesmen. 
He did not see how such a request could embarrass anybody. 

Baron Shidehara said that that would be a Chinese request, but 
not the request of the two delegations. 

Dr. Sze asked whether the Japanese delegates objected to taking 
such a course. 

Baron Shidehara replied that they had no objection. 

Dr. Sze asked whether Baron Shidehara was unwilling. 

Baron Shidehara replied that the Japanese delegates were not in 
a position to solicit the good offices. 

Dr. Sze said that the Japanese delegates had accepted in the be- 
ginning the general offer of good offices of the two statesmen. 



203 

Baron Shidehara said tliat that did not mean that the Japanese 
delegation would be obliged to accept the offer at any time. 

Dr. Sze, interrupting, said that that was an interesting remark. 

Baron Shidehara, continuing, said that he had not understood 
from the beginning that the two gentlemen would come in any time 
without request. 

Dr. Sze said that he did not want to say to Mr. Balfour and 
Mr. Hughes that the Japanese delegates requested their good offices. 

Baron Shidehara said that in the nature of the good offices they 
should be exercised at the request of the two parties. Otherwise, 
it would be an mtervention. 

Dr. Sze said thaf was riot the sense in which their participation 
was to be asked. It was not a case of intervention, but they would 
come in at the Chinese request. 

Baron Shidehara said that in the present situation the Japanese 
delegation was not going to make the request. 

Mr. Hanihara said that he would try to explain the situation. 
The Chinese delegates, on their part, had express instructions and 
could not consider the Japanese proposal, while the Japanese dele- 
gates, on their part, had equally express instructions and could not 
go any further than the railway loan plan. If, in that situation, 
they were to ask the good offices of Mr. Hughes and Mr. Balfour, 
he should wonder what useful purpose would be served by adopting 
such a course, except simply to embarrass the two gentlemen, inas- 
much as neither side was prepared to go any farther. 

Dr. Sze said that although there had been some misrepresentations,, 
yet, as Dr. Koo had already explained, the instructions of the Chi- 
nese Government had only confirmed the position the delegation had 
been taking. On the other hand, Mr. Balfour and Mr. Hughes had 
offered their good offices in unmistakable terms. By any stretch of 
the imagination an invitation to join could not embarrass the two 
gentlemen. 

Sir John Jordan suggested that he and his colleagues should re- 
port to their respective chiefs, upon their own responsibility, the 
situation which had developed to-day, and let them decide for them- 
selves as to their attitude. 

Dr. Sze said that the position of the Chinese delegation was that, 
in justice to Mr. Hughes and Mr. Balfour, they could not go behind 
these statesmen, and, in deference to Sir John's opinion, they would' 
accept his suggestion. He wondered whether Sir John's suggestion 
Avas in the nature of a supplement to that of Mr. MacMurray. 

Sir John Jordan said that he was speaking only on behalf of the 
British observers. 

Mr. MacMurray said that the two suggestions had no relation 
with each other. 

Dr. Sze asked whether the suggestion of Mr. MacMurray still 
stood. 

Mr. MacMurray said that his suggestion did not seem to have 
received approval ; neither did he insist upon it. 

Sir John Jordan said that what he wanted to do was simply to 
report what had occurred to-day. 

Dr. Sze said that the Chinese position was very clear. They were 
going to ask for the British and American advi(Je^ias a last resort. 



204 

Sir John Jordan said that he and his colleagues were merely 
intending to acquit themselves of their responsibility, just to take 
the opportunity to report on the present situation of the conversa- 
tions to their chiefs. 

Dr. Sze said that to avoid the possibility of misunderstanding 
both delegations might perhaps summarize their respective positions 
before they adjourned. 

Dr. Koo said that the position of the conversations appeared to 
stand as follows: Both of the Chinese alternative plans were still 
available; on one hand, the Chinese delegates were willing to effect 
the payment by a single deposit as the Japanese delegates had 
indicated preference therefor at a previous meeting; on the other 
hand, taking into consideration the Japanese desire to retain 
interest in, the railway, the Chinese delegates had offered a method 
of deferred payment to be effected in treasury notes or in bankers' 
notes, together with the undertaking to select and emplo}' a Japanese 
district engineer for the period in which the deferred payment 
Avould not be completed. The Chinese delegates understood that 
the Japanese delegates could not accept either of the plans pro- 
posed and that they insisted upon the plan of the Japanese loan 
agreement for the settlement of the railway question. 

In view of the fact that the reasons why China could not accept 
the Japanese plan of loan agreement, in justice to herself and in the 
interest of good undestanding and future relations between their 
two countries, had been given on more than one occasion, it would 
not be necessary for him now to recapitulate them. 

In view of the difficulties which confronted the tAvo delegations, 
which really could not be expressed by an}?^ term except " impasse," 
the Chinese delegates had suggested referring the point of differ- 
ence to Mr. Hughes and Mr. Balfour. The Chinese delegates un- 
derstood that the Japanese delegates were not able to accept that 
suggestion either. In view of that sentiment of the Japanese dele- 
gates, the Chinese delegates had against; suggested inviting Mr. 
Hughes and Mr. Balfour to join in the "conversations, in the hope 
that they might throw a new light upon the question which had 
escaped both the Chinese and Japanese delegations. That sugges- 
tion, however, was again found unacceptable to the Japanese dele- 
gates. 

In view of the situation, it had been inquired in what manner 
the Japanese delegates proposed to settle the question. The Japanese 
delegates had suggested another meeting on Monday. Thereupon 
the Chinese delegates had pointed out that as the labors of thel 
conference were drawing close to their completion, it was desirable 
that both delegations should not leave this question unsettled. 

The Chinese delegates felt they were at a loss to understand what 
was the precise position of the Japanese delegation. Yesterday 
the Chinese delegation had offered new concessions and then they 
had suggested the utilization of the good offices of Mr. Hughes and 
Mr. Balfour and the Japanese delegation had desired to consider 
the matter overnight, to which glad consent had been given. To-day, 
however, the two delegations stood almost exactly where they stood 
on December 20. If there were any difference at all in the situation, 
it was that the Japanese delegation had reverted to the position 
which they had taken before that date. 



205 

It was hardly necessary for the Chinese delegation to add that 
the Japanese view of the offer of the good offices of Mr. Hughes 
and Mr. Balfour was not shared by the Chinese delegates. The real 
nature of their offer was indicated in the minutes. 

Under all these circumstances, the Chinese delegates desired to 
have their position clearly recorded in the minutes of this meeting ; I 
that being done, they had no objection to adjourn the meeting. / 

Baron Shidehara thought that he had defined the Japanese posi- 
tion sufficiently clearly at the beginning of the meeting. He had sub- 
mitted a definite proposition regarding the terms of the loan agree- 
ment, which it was not deemed necessary to repeat. But he wished 
to point out just a point or two with reference to what Dr. Koo had 
just said. In the first place. Dr. Koo had stated that the Japanese 
delegates had reverted to the proposal which they had once aban- 
doned. He might not have correctly understood him, but he had 
gathered from Dr. Koo's remarks that it was considered the Japa- 
nese delegates were now proposing what they had once abandoned. 
That was not exactly the case. In no stage of the negotiations had 
the Japanese delegates abandoned the plan of railway loan agree- 
ment. They had discussed the Chinese alternative plans, but at the 
same time they had never given up the plan of the railway loan. 

In the second place. Dr. Koo had said that since the resumption 
of these conversations the Chinese delegates had made new conces- 
sions. As he had explained yesterday, to his mind, the new proposi- 
tions made by the Chinese delegates could not be taken in any sense 
as new concessions on China's part. 

As regarded the question of the good offices, he had said that the 
instructions which the Japanese delegates had in regard to the plan 
of railway loan were so definite and explicit that in the present 
situation the Japanese delegates could not go any further, and that 
therefore their position was that they did not feel themselves at 
liberty to request the good offices of the two gentlemen. The Japa- 
nese delegates could not very well ignore express instructions from 
home. That was the position in which the Japanese delegates were 
placed. He had said, however, that he had not abandoned the hope 
that some way might yet be found for a satisfactory solution, and 
he had proposed, and still projDOsed, that the meeting should be 
adjourned until Monday. With regard to the proposed presence of 
Mr. Hughes and Mr. Balfour at the meeting, he did not desire to 
convey the impression as if he had any objection to it, but he had 
simply expressed his doubt whether they would be disposed to join 
the two delegations without an express request from both sides. , 
These statesmen had been very considerate in their attitude and had 
scrupulously tried to avoid any appearance of interference in the 
matter, ancl he had thought it might embarrass them if only one 
party asked their presence while the other party did not. But he 
would repeat once more that it was not his intention to object to 
their coming in. 

Baron Shidehara, after some pause, asked whether it was the in- 1 
tention of the Chinese delegates to take an adjournment sine die or 
to meet again on Monday. i 

93042—22 14 



206 

Dr. Koo said that he did not exactly understand the situation. 
He wondered how the Japanese delegates proposed to settle the whole 
question if the^^ met Monday. 

Baron Shideharu said that the conversations had reached an im- 
passe. Time was needed to get out of this difficult3^ 

Dr. Sze inquired what the Japanese delegates wanted. 

Baron Shidehara said that to-day the Japanese delegates had 
given more concrete proposals than had been made before. He 
thought that neither of tlie delegations wanted to break off the con- 
versations, and that it might be useful to meet again on Monday to 
resume discussions. 

Dr. Sze said that, at the risk of repetition, he would say that if 
the Japanese delegates had expected that the Chinese delegates might 
accept the loan plan by Monday they would be disappointed. He 
Avondered if it was that the Japanese delegates wanted time in order 
to consider the two Chinese proposals. * 

Baron Shidehara said that he simply wanted time to consider what 
could be done, and that he could not c(mnnit himself to anything. 

Dr. Sze asked whether, if the Japanese delegates found that they 
could not accept either of the two Chinese proposals, they would then 
agree to solicit the good offices of Messrs. Hughes and Balfour. 

Baron Shidehara said that he would not say that. The Japanese 
might have new ])roposals to make. He did not know. 

Dr. Sze said that if on Monday they were to remain in the same 
position, pj'obablv the Japanese delegates might desire another 
adjournment of two days. 

Baron Shidehara hoped that the negotiators might be wiser by 
Monday. 

Mr. Hanihara asked; "How about to-day's communique." 

Dr. Koo stated that he wished to say that the Chinese delegates 
felt that the Japanese delegates had not been able to niove a single 
step forward to meet the Chinese delegates. The Chinese delegates 
had been making concessions, but their ingenuity in finding ways 
and means had been exhausted. The (^hinese delegates were really 
at a loss to know whether the setting of a definite date for the next 
meeting would be a wise course. The Chinese delegates would like, 
in the meantime, to acquaint Mr. Hughes and Mr. Balfour with the 
situation that had been reached. They felt that they owed it to the 
two statesmen to inform them of the situation and to consult them 
as to the date for the next meeting before the Chinese delegates gave 
a definite reply. 

Mr. Hanihara asked whether they desired to consult Mr. Hughes 
and Mr. Balfour. 

Dr. Koo said that they would like to report the whole matter to 
them, and then the Chinese delegates would let the Japanese delegates 
know the Chinese intention as to the next meeting. 

Then the form of the press communique was discussed. 

Baron Shidehara desired not to have a public announcement con- 
veying the idea that a definite break-off had occurred. It was essen- 
tial that the public sentiment should not be aroused, lest the solution 
of this difficult question might be made even more difficult. 

Dr. Sze remarked that it would be necessary to give out a full 
statement of what had transpired, not to arouse suspicions in the 
popular mind, but to quiet them down. 



207 

Dr. Koo suggested the mention in the communique of the proposal 
to refer the matter to Mr. Hughes and Mr. Balfour. 

Baron Shidehara objected to taking such a course on the ground 
that it might cause embarrassment on the part of those two gentlemen. 

Dr. Sze did not agree. He thought that there would be no cause 
for embarrassment on the part of Mr. Hughes and Mr. Balfour. He / 
would, however, not object to omitting the mention if that was going ■• 
to cause embarrassment to the Japanese delegates. 

The communique was agreed upon in the annexed form (Annex 
I), and the meeting adjourned sine die, pending further develop- 
ments, at 6.30 p. m. 

Washington, D. C, Jcmuary 6, 1922. 

SJC-20.] 

Annex I. 

January 6. 1922. 
[For the press.] 

Issued fjy the Chinese and Japanese delegations. 

ThetAventieth meeting of the Chinese and Japanese delegates was 
held at 3 o'clock in the afternoon in the governing board room of the 
Pan American Union Building. Discussions on the Shantung Eail- 
wav question were continued. 

The Japanese delegates proposed a railway loan agreement plan 
for the settlement of this question on the basis of the terms of ordi- 
nary railway loan agreements entered into by China with various for- 
eign capitalists during recent j^ears; namely, on the following gen- 
eral lines : 

1. The term of the loan shall be fixed at 15 years, while China shall 
retain an option of redeeming the whole outstanding liabilities upon 
six months' notice after five years from the date of the agreement. 

2. A Japanese traffic manager and a chief accountant shall be en- 
gaged in the service of the Shantung Railway. 

3. The details of the financial arrangement shall be worked out at 
Peking between the representatives of the two parties to the loan. 

This plan was not found acceptable to the Chinese delegation. 
The Chinese delegates, on their part, proposed the following two 
alternative plans : 

1. China to make a cash payment for the railway and its appurte- 
nant properties with a single deposit in a bank of a third power at a 
specified dat« either before the transfer of the properties or when 
such transfer is effected. 

2. China to make a deferred payment either in treasury notes or 
notes of the Chinese Bankers' Union, secured upon the revenue of the 
railway, extending over a period of 12 years, with an option on the 
part of China at any time after three years upon giving six months' 
notice to pay all the outstanding liabilities. The first installment is 
to be paid on the day on which the transfer of the properties is com- 
pleted. 

China to select and employ in the service of the Tsingtao-Tsinanfu 
Railway a district engineer of Japanese nationality. 

Neither of these plans was found acceptable to the Japanese dele- 
gates in its present form. 



208 

The meeting adjourned at/5^0)p. m. sine.jdig, pending further de- 
velopments. 

TWENTY-FIRST MEETING. 

The twentv-first meeting held in governing board room, the Pan 
American Uifiion Building, Washington, D. C., at 11 o'clock in the 
morning of Wednesday, January 11, 1922. 

PRESENT. 

^^^^,^._Dr. Sao-Ke Alfred Sze, Dr. V. K. Wellington Koo, Dr. 
Chung Hui Wang. Secretaries, Mr. Hawkling Yen, Mr. T. C. Yen, 
Mr T. Y. Tsai, Mr. T. F. Hsu, Mr. C. H. Zee. ^Ir. Chuan Chao, Mr. 
T. H. Koo. 

Japan. — Baron K. Shidehara, Mr. M. Hanihara, Mr. K. Debuchi, 
Secretaries, Mr. S. Saburi, Mr. E. Kimura, Mr. H. Saito, Mr. T. 
Shiratori. 

Also present as observers : 

The United States of America. — Mr. John Van A. MacMurray, Mr. 
Edward Bell. 

The Bntish E^npire.— The Right Hon. Sir John Jordan, G. C. I. E., 
K. C. B., G. C. M. G. ; Mr. M. W. Lampson, M. V. O. 

SALT QUESTION. 

Baron Shidehara asked whether he was to understand that the two 
delegations should now proceed to other matters than the railway 
question. 

Dr. Sze replied that, in order to utilize time, that course should be 
taken. He understood that the formula suggested in regard to the 
railway had been referred to the home Governments for instruction. 
He remembered that, at the meeting of December 10, the question of 
salt field had been taken up and Mr. Hanihara had stated that the 
matter would be referred home for instruction. He wondered whether 
any reply had been received. If so, he would like to be informed. 

Mr. Hanihara stated that about the salt question he remembered 
that the last time the question was discussed the Chinese delegates 
had proposed that they would make fair compensation to the Jap- 
anese capitalists and give assurance as to the exportation of salt to 
Japan. The Japanese proposition had been that China should recog- 
nize the vested rights of the Japanese nationals and to allow them to 
continue in their enterprise. The Japanese delegates had received 
instructions from home about that question some time ago. However, 
they being substantially the same as the original instructions, the 
Japanese delegates were still communicating with Tokio, still hoj^ing 
that some way might be found. The Japanese delegates, therefore, 
were not prepared to discuss that question that day. He suggested 
that some other matters should be taken up. 

Dr. Sze desired, without entering into the discussion of the question, 
to be informed as to the amount of salt Japan might require to be 



209 

supplied by China, if the Japanese delegates were in a position to 
give that information. 

Mr. Hanihara said that the Japanese delegates were unable as yet 
to furnish the information desired. They had not received a reply 
from Japan as to the exact amount; but, in any case, the Japanese 
Government would not request anything unreasonable, no larger 
amount than would actually be needed. 

Dr. Sze said that the reason why he asked that question was this : 
According to Japanese statistics, it appeared that the amount of salt 
annually required by Japan was 15,000,000 piculs, of which 8,000,000 
piculs were produced in Japan. Therefore she had to import 
7,000,000 piculs from outside. His information was that in Tsingtao 
there was produced only 5,000,000 piculs of salt. If his information 
was correct, the Chinese Government might try to find out some 
means by which to supply Japan with the remaining 2,000,000 piculs 
of salt out of the produce of other localities than Tsingtao fields. 
The Government, however, could not consider the matter unless they 
had an exact knowledge as to the amount of salt needed by Japan. 

Mr. Hanihara inquired where Dr. Sze had obtained those figures. 

Dr. Sze replied that they were found in Japanese statistics pre- 
pared in regard to Tsingtao. He desired to have exact information, 
because he could then inquire of the Chinese salt administration 
whether they could supply to Japan salt produced in other localities. 
If the figures were given, that would facilitate an answer on the part 
of the Chinese Government. 

Mr. Hanihara said that what the Japanese original instruction had 
stated was that Japan would desire to be allowed to import salt from 
Kiaochow, but did not wish to import any salt actually under the 
monopoly system. 

Dr. Sze said that he desired to consider the question of supply of 
salt to Japan as one of business. That would be a business proposi- 
tion to one of China's industries. 

Baron Shidehara wondered whether, if the figures were correct, 
it was Dr. Sze's idea that China would supply 7,000,000 piculs. 

Dr. Sze replied that he could not say anything; definitely ; but the 
correct figures were needed by Peking. The Chinese Government 
did not want to commit themselves to the amount of salt to be ex- 
ported to Japan and later find themselves unable to fulfill their en- 
gagement, placing Japan in a difficult position. He thought the 
figures to which he had been referring were prepared two years 
before. He would like to know whether they were still correct. 

Baron Shidehara remarked that the figures given by Dr. Sze were 
helpful information. 

Dr. Sze said if definite figures could be obtained, they would be a 
great help to the Chinese salt administration in giving consideration 
to the matter and in making provisions for the disposal of the sur- 
plus salt. 

Baron Shidehara said that he had no technical knowledge on this 
question, but the shortage of salt in Japan would differ each year 
according to the climatic conditions. A report appearing in a 
Japanese newspaper read as follows : 

"A decrease in the salt production in Japan is expected for the 
fiscal year 1921-22, due to climatic conditions. Over against 9,500,000 
piculs of the commodity that was raised in the preceding year, we 



210 

shall have 8,500,1)00 piculs this year, with the result that Japan is 
faced with a decrease of 1,000,000 piculs for the current year. The 
demand for salt in Japan, on the other hand, is 14,000,000 piculs a 
year. So the shortage this year will be as much as 5,500,000 piculs. 
This shortage has to be met by the importation of the Tsingtao and 
the Kwantung salt." 

Dr. Sze stated that the climatic conditions would have a great in- 
fluence upon the salt industry, especially those during the rainy 
season in summer. 

Baron Shidehara said that the whole matter would after all be a 
commercial transaction. If China had surplus salt for exportation, 
it would be of advantage to both Japan and China. 

Dr. Sze said that it seemed to him the Tsingtao figures indicated 
more salt was required by Japan than what could be supplied from 
Tsingtao, but the two delegations might confine their discussions to 
Tsingtao salt. 

Baron Shidehara said that that had always been the Japanese 
j)osition. 

WITHDRAWAL OF TKOOPS. 

Dr. Sze said that as to the taking up of other questions, he might 
be permitted to suggest that they should first discuss questions easier 
of solutioh, so that they might be able to announce at the end of the 
meeting that satisfactory progress had been made. He wondered 
whether the Japanese delegates were ready to discuss the question of 
the withdrawal of troops stationed along the Kiaochow-Tsinan-fu 
Railway. 

Baron Shidehara said that the Japanese delegates were quite ready 
to take up that question. 

Dr. Sze said that, first of all, he wanted to ask one thing. He was 
given to understand that there had been some Japanese marines sta- 
tioned in Shantung, but that they were withdrawn on April 1 last 
year. He wondered whether there now remained in Shantgung only 
ordinary troops. 

Baron Shidehara replied that that was the case. He would now 
suggest a plan of settlement somewhat on the following lines : 

'• The Japanese troops stationed along the Tsingtao-Tsinan-fu 
Railway will be withclrawm as soon as possible upon handing over to 
the Chinese police forces the protection of the railway. . In the sec- 
tion of the railway in which the Chinese police forces shall have 
taken oA^er such protection, the Chinese authorities shall be re- 
sponsible for the full and efficient protection of the raihvay as well 
as of the persons and property of foreign residents. The taking over 
by the Chinese police forces of the protection of the entire line of 
the railway and the complete withdrawal of the Japanese troops 
stationed along the railway shall be effected within some definite 
period to be arranged, and the Japanese garrison at Tsingtao shall 
be withdrawn in the same manner." 

Dr. Sze inquired whether Baron Shidehara had any suggestion as 
to the period. 

Baron Shidehara asked whether the Chinese police forces were 
ready at any moment to take over the protection. 



211 

Dr. Sze said that they could do so. China had sufficient police for 
other lines. Moreover, troops might be utilized as well. 

Baron Shidehara said that he presumed that two or three thousand 
men might be required. 

Dr. Sze said that the figures he had showed that there were 2,300 
Japanese soldiers, but he thought Mr. Hanihara had said 1,800. 

Baron Shidehara said that his rough recollection was that there 
were something like 2,500, including the Tsingtao garrison. The 
troops stationed along the railway numbered approximately 1,800. 
The question really depended upon how soon China could take over 
the protection of the railway. 

Dr. Sze thought that the matter would be facilitated if a certain 
date were mentioned ; if it was set as so many days or months from 
the signing of the agreement. The Chinese police and troops might 
be sent in advance of that date to take over the duties of the protec- 
tion. If a definite date was mentioned, they would be ready on that 
day on the spot. 

Baron Shidehara said that there should be no interregnum. The 
necessity to make preparations for the shipping facilities to take 
back those soldiers to Japan should also be taken into consideration. 

Dr. Sze inquired what date Baron Shidehara proposed to suggest, 
what date after the signing of the agreement. 

Baron Shidehara stated that nine months might be tentatively de- 
cided upon, it being understood that China was ready to take over 
the protection of the railway Avithin that period. The withdrawal 
of the Japanese troops could be effected section by section, and the 
last installment would be withdrawn within that period. The first 
installment could be withdrawn much earlier. 

Dr. Sze said that, in view of the small number of Japanese troops, 
nine months appeared to be too long. He thought that the Japanese 
Government could furnish shipping facilities at any time. 

Baron Shidehara said that the important point was that as soon 
as China could organize and send the police to take over the pro- 
tection the Japanese troops would be withdrawn. It would be very 
difficult for the Japanese delegates to see whether a shorter period 
would be quite enough. He wondered what date Dr. Sze would 
suggest. 

Dr. Sze said in view of the small number of the Japanese troops 
and the short distance to Japan he would suggest 30 days from the 
signing of the agreement. 

Baron Shidehara said it would be very difficult that the with- 
drawal should be effected within 30 days from the signing of the 
agreement. He would make the coming into force of the agreement 
as the starting point. 

Dr. Sze said that he would now propose 30 days from the date of 
the coming into force of the agreement. 

Baron Shidehara said that he was not sure whether that period 
was sufficient, whether China could definitely undertake to take over 
the protection of the railway in 30 days. 

Dr. Sze said that the assigning of the police would be an easy 
matter. His experience .at Harbin, while in the customs service, 



212 

would show that if a police force to safeguard the railway were 
taken from the ordinary local police force, it would be a question of 
only a few days. 

Baron Shidehara said that as a matter of fact he had received no 
suggestions from home. He had, however, suggested nine months, 
tentatively. 

Dr. Sze said that his idea was that China had experienced men 
in other railways. It would take a long time if they were to train 
men newlj?^, but since there w^ere men well trained for the special 
duties of efficiently guarding railwaj^s, 30 days after the coming into 
force of the agreement would be sufficient. 

Mr. Hanihara inquired whetlier the Chinese delegates meant that 
the withdrawal should be completed with 30 days. 

Dr. Sze replied in the affirmative. 

Mr. Hanihara said that he did not know whether the period was 
sufficient. There were minor matters to be arranged in relation to 
the withdrawal. 

Baron Shidehara said that it was simply a question of practica- 
bility. The Japanese delegates had no intention of prolonging the 
stay of troops. He was not a military man, but had just thought that 
nine months Avould be a reasonable limit. 

Dr. Sze said that nine months were 275 days. If Japan had 2,500 
soldiers it would mean that eight men would be withdrawn a day. 
He had proposed 30 days, which would mean 80 men a day. He did 
not think that 30 days were too short. 

Baron Shidehara said that he did not propose nine months' period 
in the sense that the Japanese troops would be likely to stay sa 
many months longer. The period had been proposed as one within 
which the withdrawal should actually be effected. If it could be 
done earlier so much the better for Japan. 

Then Baron Shidehara proposed a formula which was, in rough 
draft, as follows: 

" Upon the coming into force of the present agreement the Chinese 
police force will, as soon as possible, be detailed to take over the pro- 
tection of the railway. The Japanese troops now stationed along 
the railway will immediately thereupon be withdrawn from such 
sections of the railway as the Chinese police force shall have been 
so detailed." 

China would not be able to send her men in one day. The Japanese 
troops would be withdrawn as soon as China would send her police 
force to take over the duties of guarding the railway. If that 
arrangement could be made it would not be necessary to fix any 
definite date for the withdrawal. If the withdrawal from a certain 
section was arranged, for, say February first, China would send her 
men to that section on that date. Then the Japanese troops would 
immediately be withdrawn. He desired that in any case the Japanese 
Government should be informed of the exact date in advance of the 
dispatch of police by the Chinese Government. 

Dr. Sze pointed out that in Baron Shidehara's formula the Japan- 
ese garrison in Tsingtao were not included. He wanted to know 
what kind of provisions were going to be made for the Tsingtao 
troops. 



213 

Baron Shidehara said that the date of the withdrawal of the 
Tsingtao garrison depended upon the date of the transfer of the 
leasehold to China. As he understood, there had been no arrange- 
ment made yet in regard to the transfer of the leasehold. If the 
date for that transfer was fixed Japan could propose withdrawing 
the said garrison in, say, one month from that date. 

Dr. Sze wondered whether, when it was said that the troops were 
to be withdrawn from along the railway, it was meant that they 
should be withdrawn to Japan. He would ask Dr. Koo to present a 
formula which appeared to him to be very comprehensive and clear 
on those points. 

Dr. Koo said that he did not know if his formula Was any im- 
provement upon the Japanese formula. This question of the with- 
drawal of the troops was very important for both Japan and China, 
and any agreement concerning it ought to be as clear and definite as 
possible. The formula read as follows: 

" The Japanese Government engages to withdraw to Japan within 

days from the coming into force of this agreement all 

the Japanese troops, police of all kinds, and other Japanese forces 
in the leased territory of Kiaochow, along the Tsingtao-Tsinanfu 
Kailway and its branches, and in other parts of Shantung Province. 

" The Chinese Government will provide the necessary Chinese 
forces to take over, upon the withdrawal of the said Japanese forces, 
the protection of the said railway and its branches." 

If it was desired that the said withdrawal should be made by sec- 
tions he would suggest adding the following sentence to the above 
formula : 

" It is agreed that the said withdrawal shall be effected in the fol- 
lowing proportions and on the following dates : : ." 

Continuing, Dr. Koo said that the idea of the draft was in line 
with the desire repeatedly declared by the Japanese Government to 
remove all troops and other Japanese forces from the Shantung 
Province as soon as possible. He thought that the arrangement pro- 
posed by him in the above formula would be easy of execution for 
both sides. 

Baron Shidehara said that his own formula was framed with a 
view to seeing that there was no interregnum. Dr. Koo's formula 
provided for the sending of Chinese police immediately upon the 
withdrawal of the Japanese troops, which arrangement he was afraid 
might necessarily leave a certain brief period of time during which 
the railway properties might be without protection. 

Dr. Koo said that the Chinese forces would be on the spot imme- 
diately on the withdrawal of the Japanese troops. It was not de- 
sirable that the two forces should find themselves together on the 
same spot for any length of time, for it was possible that untoward 
incidents might result from their contact with each other. His plan 
amounted to this : That the dates should be fixed here,- and that the 
hours should be left to local arrangement. For instance, it might 
be so arranged that on a certain date the Japanese troops should 
withdraw from a certain section of the railway, at, say, 11 o'clock in 
the morning, and the Chinese troops should be there an hour later. 
That will serve to avoid possible mishaps. 



214 

Baron Shidehara said that he couhl agree that dates shouhi be 
fixed in advance. He wondered wliat would be the Chinese sugges- 
tion in that respect. He added that, of course, in withdrawing troops 
from the railwa}^ it could not be expected that the necessary steamer 
accommodations would be available for the transportation of the 
troops to Japan at a stated time. In other words, it would natu- 
rally be necessary that the troops should remain in Tsingtao for sev- 
eral days before embarkation. 

Dr. Koo said that he did not think it impossible for the Japanese 
troops to be transported directly to Japan, for the Ja])anese Gov- 
ernment was generally very efficient in carrying out its plans in such 
matters. It was merely a question of preparation beforehand. 
Japan could make preparations sufHciently in advance so that there 
might be no delay in Tsingtao. He really Avondered if there was any 
particular difficulty about taking for the date of the withdrawal the 
date of the coming into effect of the agreement on the Shantung. AVhat 
the Japanese Government was solicitous about was perhaps the pro- 
tection of the railway properties. So long as Chinese forces were 
sent promptly there would seem to be no particular reason to delay 
the withdrawal of the Japanese troops. 

Baron Shidehara said that it was certainly so. Here he asked Dr. 
Koo to read his formula once more, which Dr. Koo did. 

Baron Shidehara said that the practical plan was to withdraw the 
troops by sections, and that available transport facilities should also 
be taken into consideration. He had no knowledge about those de- 
tails, and it seemed to him impracticable just at that moment to fix 
a definite date. He would suggest an arrangement on the following 
lines : 

■■'Upon the coming into force of the present agreement the Chinese 
Government will, as soon as i^ossible. send a sufficient number of 
police force to tak^ over the protection of the Tsingtao- Tsinanfu 
Railway. The Japanese troops now stationed along the railway will 
immediately thereupon be withdrawn from such sections of the rail- 
way as the Chinese police force shall have been so sent. 

'"' It is understood that in the sections of the railway in which the 
Chinese police force shall have taken over such protection the Chi- 
nese authorities shall be responsible for the full and efficient protec- 
tion of the railway as well as of the i^ersons and 'property of foreign 
residents. 

'" The elates of the withdraAval of such troops shall be arranged in 
advance between the two Governments, but in no case shall the com- 
plete withdrawal extend for any period longer than 

months from the date of the coming into force of the present agree- 
ment." 

Dr. Sze said that the value of any agreement was in its clefinite- 
ness. That was especially so in the present case of the withdrawal 
of the Japanese troops. A definite date was of the utmost import- 
ance. Without it the proposed agreement on this point would be of 
little value. It would perhaps be recalled by the Japanese delegates 
that when the question of the withdrawal of foreign post offices in 
China had been taken up and Japan had been referring home for s 
definite date of the said withdrawal, there had been much misgiv- 
ing caused thereby in China. When the Chinese delegates insisted 



215 

upon a definite date in the present case it was not so much because 
they entertained any doubt as because of their desire to ease the 
public mind in China. 

Baron Shidehara said that he could appreciate the spirit of the 
Chinese plan. The idea of the Japanese formula was to fix the last 
date by which the withdrawal should be completed while providing 
for withdrawal in sections. 

Dr. Sze said that the Japanese plan seemed to contain no reference 
to the withdrawal from Tsingtao. 

Baron Shidehara asked if importance was placed on the point of 
the troops being withdrawn to Japan direct. 

Dr. Sze said that what he meant was not only that but the with- 
drawal of the Tsingtao garrison. 

Baron Shidehara said that in that respect he would propose the 
following formula: 

" The Japanese garrison at Tsingtao shall be withdrawn within 
30 daj^s from the date on which the transfer of the administration 
of tlie leased territory is completed." 

Dr. Koo signified his desire to further clarify the matter of the 
railway guards. He understood that there were two branches of the 
Japanese railway forces. One was the troops stationed along the 
railway and its branches, and -the other was those forces found out- 
side the railway zone. 

Baron Shidehara said that they were all covered in the first for- 
mula proposed by him. 

Dr. Koo said that in the Japanese note of September 7, 1921, it 
was proposed that the Japanese troops stationed along the Kiaochow- 
Tsinanfu Eailway should be withdrawn upon organization by China 
of a police force to assume protection of the railway. That was to 
say, that the Japanese troops outside the leased territory of Kiao- 
chow should be withdrawn independently of an agreement on the 
Shantung question. That point had been mentioned also in the Chi- 
nese note of October 19. 1921. When Japan had first proposed nego- 
tiations upon Shantung to the Chinese Government in her memoran- 
dum of January 19, 1920, the question of the railway guards had 
been mentioned, stating that the troops would be withdrawn even 
before an agreement had been reached on the question of Shantung. 
In point of fact, in the memorandum of January 19, 1920, as it had 
been communicated by the Japanese legation at Peking, had oc- 
curred a passage to the effect that under existing circumstances the 
Japanese Government had no other way than to retain the troops 
along the railway for the time being for the purpose of protecting 
the railway. The Japanese legation on February 4, 1920, followed 
with a communication that there had been an error in deciphering 
the memorandum of January 19, which should have read to the 
effect that, although for the purpose of the protection of the railway 
the Japanese forces had to be retained for the time being, the Jap- 
anese Government would be ready even before an agreement upon 
Shantung had been reached, to proceed to the withdrawal of the 
troops as soon as China's railway police was ready to take over the 
protection of the railway. 

That was why he (Dr. Koo) said " all troops, etc.," in his formula. 
The idea was to show that not only the troops along the Shantung 



216 

Railway but those in other parts of Shantung should be withdrawn, 
and that said withdrawal should proceed independently of the agree- 
ment. There was no doubt that an announcement of that character 
would dissipate misgivings in China. He thought that in drafting 
an agreement on the subject it ought to be made quite clear that those 
troops should be withdrawn independently of the coming into force 
of the general agreement on Shantung. 

Baron Shidehara said that in his draft he had put in at the begin- 
ning the phrase "upon the coming into force of the present agree- 
ment, etc.," because he thought it Avould be impossible for China to 
send the necessary police forces to-day or to-morrow, nor for Japan 
to withdraw her troops in a few days. He was, however, willing to- 
strike that phrase out and agree to withdraw the troops immediately 
upon China sending the necessary forces. Japan had always drawn 
a distinction between troops in the leased territory and those outside 
of it. The formula proposed by him was intended for the Japanese 
troops within such a territory. He thought that the two delegations 
had agreed on broad principles of the withdrawal of the troops, only 
the question of the exact time of such withdrawal bein^ left unde> 
cided. 

Dr. Sze said that, as had been pointed out before, Baron Shide- 
hara's formula was a little too indefinite as to date, which was all 
important. There were also other points on which the Chinese dele- 
gation desired to make some obsen-'ations. He would suggest they 
adjourn until that afternoon and then try to conclude definite ar- 
rangements so that the decision might be given for the newspapers, 
for the next day. 

Baron Shidehara asked if his formula was considered not definite 
enough because days and months were not expressly mentioned. 

Dr. Sze said that the Chinese delegation wished also to make ob- 
servations on other points. He wondered if the Japanese delegation 
could see their way to take Dr. Koo's draft as a basis. He and his 
colleagues would agree to make some modifications in that formula 
in order to meet the Japanese viewpoint. 

Baron Shidehara said that in Dr. Koo's formula mention was made 
of Japanese police forces. That was entirely another question. 

Dr. Sze wondered if there were not Japanese police forces along; 
the railway. 

Baron Shidehara said he understood there were no railway police. 
Of course, there were gendarmes, but they were part of the troops. 
There might also be certain police forces attached to the Japanese 
consulate at Tsinanfu. The question of that kind of a police force 
was now pending in the Far Eastern Committee. 

Dr. Sze said that the meaning of Dr. Koo's draft in that regard 
was that the Japanese troops should not be replaced by some other 
force under some other name. 

Baron Shidehara said there was no Japanese force for the protec- 
tion of the railway. 

Dr. Koo asked if there were not military constabulary. 

Baron Shidehara said that they were part of the military forces. 

Mr. Hanihara said that he could not attend the meeting that after- 
noon. He suggested that if his Chinese friends could agree to the 
formula presented by Baron Shidehara it could be given to the news- 




217 

rs_fQr-4he next day. It would be, he thought, good news for the 
public. The difference was only a question of days and months, and 
not years. 

Dr. Koo said that there was something more to it. That was why 
the Chinese delegation wished to make some observations. 

Dr. Sze said that the Chinese delegates wanted to have some 
agreement in terms so definite as to forestall loose interpretation on 
the part of the public. He thought the Chinese proposal was in that 
respect more adequate. He regretted that Mr. Hanihara could not 
■come there that afternoon, but, as Baron Kato had suggested at the 
initial meeting what they called a panel system, he hoped the Japa- 
nese delegation might see their way to go over just that part of the 
discussion and complete it that afternoon. 

Baron Shidehara agreed that the afternoon session should take 
place at 4 o'clock. 

Dr. Sze repeated his regret at missing Mr- Hanihara's beaming 
smiles. 

Baron Shidehara said that the procedure that the Japanese dele- 
gates suggested was that the Chinese police should be right there on 
the spot before the Japanese troops withdreAv. The Chinese plan 
was that the Japanese troops should be first withdrawn and that 
then the Chinese police force would appear. The Japanese idea 
was to avoid an interregnum. 

Dr. Koo said that the Chinese delegates would modify their plan 
to meet that point. 

Washington, D. C, January 11, 1922. 



TWENTY-SECOND MEETING. 

The twenty-second meeting, held in governing board room, the 
Pan American Union Building, Washington, D. C, at 4 o'clock in 
the afternoon of Wednesday, January 11, 1922. 

PRESENT. 

China. — Dr. Sao-Ke Alfred Sze, Dr. V. K. Wellington Koo, Dr. 
Chung Hui Wang. Secretaries : Mr. Hawkling Yen, Mr. T. C. Yen, 
Mr. T. Y. Tsai, Mr. T. F. Hsu, Mr. C. H. Zee, Mr. Chuan Chao, Mr. 
T. H. Koo. 

Japan. — Baron K. Shidehara, Mr. K. Debuchi. Secretaries: Mr. 
S. Saburi, Mr. E. Kimura, Mr. H. Saito, Mr. T. Shiratori. 

Also present as observers: 

The United States of America. — Mr. John Van A. MacMurray, 
Mr. Edward Bell. 

The British Empire. — The Right Hon. Sir John Jordan, G. C. 
I. E., K. C. B., G. C. M. G. ; Mr. M. W. Lampson, M. V. O. 

WITHDRAWAL OF TROOPS. 

Baron Shidehara handed to the Chinese delegates the following 
formula : 

" The Japanese troops, including gendarmes now stationed along 
the Tsingtao-Tsinanfu Railway, shall be withdrawn as soon as the 



218 

Chinese police force shall have been sent to take over the protec- 
tion of the railway. 

" The disposition of the Chinese police forces and the withdrawal 
of the Japanese troops under the foregoing provisions may be 
effected in sections. The date of such process for each section shall 
be arranged in advance between the competent authorities of Japan 
and China, but in no case shall the entire withdrawal of the Japa- 
nese troops extend for a period longer than six months from the 
date of the signature of the present agreement. 

" It is understood that in the sections of the railway in which the 
Chinese police force shall have taken over such protection the Chi- 
nese authorities shall be responsible for the full and efficient protec- 
tion of the railway as well as of the persons and property of foreign 
residents. 

" The Japanese garrison at Tsingtao shall be withdrawn within 
30 days from the date on which the transfer of the administration 
of the leased territory to China is to be completed." 

Baron Shidehara said that the Chinese delegates would recognize 
that he had somewhat modified his draft. He desired before pro- 
ceeding with the discussion of the question to state that he would 
like to give figures as to the number of the Japanese troops stationed 
along the railway and the leased territory of Kiaochow. The number 
stood at 2,700 officers and men. of whom 1,800 were distributed along 
the railway and 900 stationed at Tsingtao. With regard to the police 
force, there were 12 men attached to the Japanese consulate at 
Tsinanfu. The number of the troops just mentioned included 300 
gendarmes, 

_Dr. Koo said that after the morning session had adjourned he 
had tried to draw up a new formula by amalgamating the drafts 
by Baron Shidehara and himself. Perhaps the Japanese delegates 
would like to see it. The substance was the same as the earlier 
drafts of the two delegations. Whereupon he handed over to the 
Japanese delegates the following formula : 

" The Chinese Government will as soon as possible send a sufficient 
number of military or police force to take over the protection of the 
Tsingtao-Tsinanfii Railway. The Japanese Government will there- 
upon immediately withdraw to Japan all the Japanese troops, mili- 
tary constabulary, and other forces which are now stationed along 
the railway and its branches and in other parts of Shantung. 

"The date of the withdrawal of the said Japanese troops, con- 
stabulary, and other forces shall be arranged in advance between 
the two Governments, but in no case shall the complete withdrawal 
of the said troops, constabulary, and other forces extend beyond the 
date of the coming into force of the present agreement. 

" The withdrawal of the Japanese garrison at Tsingtao, however, 
shall be completed not later than the date on which the transfer of 
the administration of the leased territory of Kiaochow takes place." 

The only point of difference. Dr. Koo continued, between Baron 
Shidehara's formula and his own was, in the first place, as to the 
dates on which the withdrawal of the two classes of troops — one 
stationed in and the other outside of the leased territory — was to be 
completed. On that point he would say that the Japanese forces 
along the railway and other points in Shantung should be withdrawn 



219 

not later than the date of the coming into force of the present agree- 
ment, so that no departure should be made either from the position 
hitherto taken by the Japanese Government or that taken by the 
Chinese Government. 

As to the withdrawal of the Japanese garrison from Tsingtao, 
such withdrawal should be effected when the transfer of the leased 
territory of Kiaochow took place, in order not to give ground for 
misgiving on the part of the Chinese people. He took it that if 
the transfer of the administration was effected and the Japanese 
troops should fail to be withdrawn at the same time, if they were 
to remain longer, even by a few days, after the transfer had taken 
place, an awkward situation would present itself. 

There was another point — the responsibility of protecting the 
railway. That was, in the opinion of the Chinese delegates, more or 
less implied. When th^ Chinese authorities undertook to send 
Chinese forces to the railway, he thought they naturally Avould see 
that such protection would be given. He thought and felt certain 
that protection would be given independently of unj express under- 
taking in the agreement. Such protection was implied in all treaties 
subsisting between China and Japan. He was sure that the Japanese 
delegates would share his views on that point. The Chinese Gov- 
ernment would feel that absence of any provision in the agreement 
would not matter. 

On the other hand, as to the withdrawal by sections of the troops, 
if Baron Shidehara thought that it was advisable to insert a clause 
on that point, the Chinese delegates had no objection. The Chinese 
delegates only thought that that was a question of detail. 

Baron Shidehara said that the dates as proposed by him should 
offer absolutely no ground for suspicion that Japan desired to pro- 
tract the stay of the soldiers in Shantung. The Japanese delegates 
were as anxious as the Chinese delegates to have the troops with- 
drawn. However, when an understanding was made, he thought it 
most essential that it should be of such a nature as could be carried 
out without fail. So far as the withdrawal of the Japanese troops 
stationed outside the leased territory was concerned, it depended 
practically upon the time when the Chinese police would be ready 
to take over the protection of the railway. What Japan desired 
was that Chinese police forces should be on the spot. Should China 
send their men within two weeks, the withdrawal should take place 
within two weeks. 

Dr. Koo observed that the obligation rested on the Chinese Gov- 
ernment as well as upon the Japanese Government. It was recip- 
rocal. 

Baron Shidehara assured the Chinese delegates that Japan would 
undertake that as soon as the Chinese police force were on the spot 
the Japanese troops would at once be withdrawn. 

Dr. Koo said that if they were to have a longer period within 
which to effect such withdrawal it would only cause general mis- 
apprehension, because heretofore the Japanese Government had 
made it clear and the Chinese Government had understood that the 
Japanese troops stationed along the railway and in Tsingtao would 
be withdrawn as soon as the Chinese police forces were sent to take 
over the duty of protecting the railwa3\ and that such withdrawal 
could be effected even before an agreement was reached in regard 



220 

to the whole of the Shantung question. The Chinese delegates, on 
their part, had no desire to give rise to misapprehension that China 
desired to prolong sending such force to Shantung. He knew that 
Japan, on her part, did not desire to prolong the withdrawal either. 

I3aron Shidehara said that that was not the intention of Japan at 
all. He did not think, however, that there could be any misappre- 
hension on the part of the public if the agreement was reached in 
the form, he had drafted it. If it was signed now the troops would 
be withdrawn at the latest by July next. He thought that that was 
a short period of time. 

Dr. Koo said that he saw that, but he wondered whether his point 
had been made clear. The Chinese position was this: In the note 
sent to the Chinese Government by the Japanese minister in Peking 
on January 19, two years ago, the Japanese Government declared 
that they had no objection to effect the withdrawal of troops even 
before reaching an agreement on the Shantung question. That fact 
was widely known in China. Therefore if an insertion should be 
made in the agreement that the completion of the withdrawal would 
extend over six months after its signature, the withdrawal of the 
troops would be generally regarded as being unduly delayed. 

Baron Shidehara said that that was not the meaning of his draft. 
The Japanese delegates had no intention of unnecessarily prolong- 
ing the withdrawal of the troops. It was expressly stated in the 
draft that " as soon as the Chinese police force shall have been sent 
to take over the protection of the railway" the Japanese troops 
would be withdrawn. 

Dr. Koo asked wdiether it was then the suggestion of Baron Shide- 
hara to provide for the contingency that the Chinese police force 
might not be ready to take over the protection. 

Baron Shidehara said that some arrangement should be made in 
advance so that the Chinese police force should be on the spot when 
the withdrawal of the Japanese troops would take place. Such ar- 
rangement should be made locally; it could not be made here in 
Washington. He wondered whether that could be done before the 
coming into force of the agreement. He thought that there should 
be a sufficient margin of time. 

Dr. Koo said that really the shorter the period the greater would 
be the obligation to get the police forces ready to take over the pro- 
tection of the railway. 

Dr. Sze feared that the period of six months might be misinter- 
preted as a departure from the declared intention of the Japanese 
Government. 

Baron Shidehara said that that could not be taken as a departure. 
That would be clear from the first part of the draft. 

Dr. Sze said that it might be taken as if to provide a pretext to 
the Japanese commandant to remain six months longer. 

Baron Shidehara said that that was not at all the case. When the 
Chinese police force were sent the Japanese troops would at once 
be withdrawn. It would never prolong the departure of the Jap- 
anese troops. He thought that it would be better, in order to avoid 
any possibility of misunderstanding, that the dates should be ar- 
ranged in advance by the authorities of the two countries. He sup- 
posed that a period of six months was not too long. It only defined 
the end of the withdrawal. The public would never misunderstand. 



221 

Dr. Koo said that the Chinese Government were anxious to have 
a definite date stated because they had to provide the police force. 
If it was agreed that the complete withdrawal would be effected 
not later than the date of the coming into force of the present agree- 
ment, China, on her part, would see to it that necessary police force 
should be ready within a ver}' short period. He did not think that 
that would add any difficulty. As a matter of fact, he thought that 
there would be some time between the signature of the agreement 
and its coming into force. 

Baron Shidehara called the attention of the Chinese delegates to 
the fact that he had put it " signature " instead of " coming into 
force," because he could not depend so much upon the date of the 
latter as on that of the former. 

Dr. Sze said that if there were 1,800 men the period of six 
months would mean the withdrawal of nine men a day. Japan 
could do better than that. 

Baron Shidehara said he himself did not quite know what form 
this arrangement should finally take. If it was going to be a treaty, 
it would be necessary to exchange ratifications. It would take quite 
a long time to conclude such exchange. He wanted to make it clear 
that the withdrawal would not be dependent upon the coming into 
force of the agreement. 

Dr. Sze said, according to the understanding of the Chinese dele- 
gates, the Japanese Government had declared two years ago that 
the withdrawal of the troops could be effected without regard to the 
general agreement on the Shantung question. 

Dr. Koo said that the Chinese delegates had no particular prefer- 
ence for the " coming into force " if it was Baron Shidehara's idea 
to take " signature " as the starting point. The period could be 
fixed at two or three months from the date of the signature without 
giving rise to misapprehension in the popular mind. 

Dr. Sze thought that, in the nature of the case, the less qualifying 
clauses attached to the agreement the better the general effect. 

Baron Shidehara said that he really did not see why the period 
of six months would give rise to misapprehension. He did not 
know when the present arrangement could come into force. If it 
would take the form of a regular treaty, it would not be capable of 
coming into force before its ratification. It might take six months. 

Dr. Sze observed that should the withdrawal of troops be made 
to depend upon the signature of the agreement, it would be going 
counter to the undertaking Japan had made two j^ears ago that it 
would be effected independently of the arrangement of the whole 
Shantung question. 

Baron Shidehara said that the agreement stated that the with- 
drawal would be completed within six months, but that it could be 
effected any time as soon as the Chinese police force was ready to 
take over the protection. 

Dr. Sze remarked that even if they made the signature of the 
agreement the starting point, the date would still be uncertain. 

Baron Shidehara said that it could be said that the entire with- 
drawal of the Japanese troops should not extend longer than six 
months from such and such a date. And at the same time it could 
be said that the withdrawal would be effected independently of the 
93042—22 15 



222 

a«i;reement. Tlien the nrian<remeiit would still be in conformity 
with the Japanese note of Januaiy 19, 1920. 

Baron Shidehara added he supposed that the present arrange- 
ment formed part of the general agreement on the Shantung ques- 
tion. Should the whole agreement fall through, the present agree- 
ment would also fall through. 

Dr. Sze replied in the negative. He thought the withdrawal of 
the troops should be effected independently of tlie agreement on 
the Avhole Shantung (juestiou, as had been nuniifested in Mr. Obata's 
note alhuled to before. 

Baron Shidehara wondered whether Dr. Sze meant to say that it 
Avould not be necessary to nuike an arrangement about the with- 
drawal of the troops in relation to the Shantung question. 

Dr. Sze stated that that was what Mr. Obata's note said. (He 
showed Baron Shidehara a copy of the note in Chinese.) 

Baron Shidehara said if the Chinese delegates would say that that 
offer was acceptable, the way for the Chinese Government to take 
Avas to write to Mr. Obata that they were ready to organize and 
send a police force on such and such a date. The question could 
be settled at once. That offer had long been made, but China had 
not answered it. 

Dr. Sze said that if that course Avere to be folloAved the impres- 
sion Avould become abroad that there Avas no harmonious Avorking 
between here and Peking. 

Baron Shidehara Avondered Avhether he Avas to understand that 
the Chinese delegates Avere ready to accept the offer made by Mr. 
Obata. 

Dr. Sze stated that he had only alluded to a certain offer previously 
made by Japan and Avhich he understood still stood. If an ar- 
rangement Avere made along the lines suggested by Baron Shide- 
hara, the people might say that they did not tally Avith the Japa- 
nese note of 1920. 

Baron Shidehara said if China Avas to accept this offer it would 
be very simple. It Avould not be necessary to make an arrangement 
here on this point. 

Dr. Koo said that the point Avas if the offer still held good, then 
the two delegations might take it as a basis for discussion at present. 

Baron Shidehara said that that offer certainly held good uoav. If 
China should accept it, arrangements should be made in Peking. 

Dr. Koo asked Avhether that offer could not be taken as a basis 
of discussion here. The two delegations had reached an agreement 
in substance ; it Avas only details that they were discussing. 

Baron Shidehara said after all there were tAvo alternatives — in 
the first place, for China to accept Mr. Obata's offer, or, if the 
Chinese delegates desired to propose that the details of the matter 
should be discussed at this meeting, they would have to be dis- 
cussed as a part of the settlement of the whole Shantung question. 

Dr. Sze thought that the phrase " from the date of the signature " 
was misleading; he would stick to the Chinese position that a defi- 
nite date should be mentioned — say, March 1, March 15, or April 1 — 
so that the people would haA^e no misapprehensions. 

Baron Shidehara desired to know whether it was understood that 
the proposed agreement formed part of the whole agreement of the 
Shantung question. 



V 223 

Dr. Sze said that it was the same as in the case of the post offices 
discussed at the full meeting on the Pacific and Far Eastern ques- 
tions. A definite date should be mentioned. Substantially it would 
be the same thing, but it would be better for the Chinese delegation — 
and for both delegations — because they could easily make people un- 
derstand. Therefore the Chinese delegates would stick to their old 
stand. 

Baron Shidehara said that before discussing that point he would 
ask Dr. Sze whether the Chinese delegates accepted the Japanese 
position that the clause formed part of the general agreement? 

Dr. Sze replied that it depended upon in what sense Baron Shide- 
hara said so. He wished that he would not be misunderstood, but, 
unfortunately, he could not see why the clause should be made con- 
tingent upon the general settlement of the question. 

Baron Shidehara said that if Dr. Sze were of opinion that the 
present agreement for the withdrawal of the troops formed no part 
of the whole Shantung settlement, he had to express a different view. 
This clause could not take effect independently of the general agree- 
ment, but even in case the general agreement fell through the Chinese 
delegates would not be placed in any worse position in regard to the 
matter of the withdrawal of troops. 

Dr. Sze said that he did not quite perceive the meaning of Baron 
Shiclehara's words. Did Baron Shidehara mean that the offer held 
good in Peking, but not in Washington? 

Continuing, he desired to ask a question in regard to paragraph 
1 of Baron Shidehara's draft. If China should dispatch her police 
force immediately, would Japan be prepared to withdraw her troops 
at the same time ? 

Baron Shidehara said that the date must be fixed in advance. 

Dr. Sze inquired whether, if China should be prepared to send 
2,000 police force or troops within, say, 10 days, and should request 
the withdrawal of the Japanese troops, such proposition would be 
entertained? He desired to know exactly whether that was the 
meaning of that paragraph. He wanted to know to what extent 
paragraph 1 was modified by paragraph 2. 

Baron Shidehara said that paragraph 2 did not in any way modify 
paragraph 1. The former only supplied the method to give effect 
to the engagement made in the latter. 

Dr. Sze inquired whether, should China say that the police force 
would be dispatched to Shantung, say, next week, or February 10, 
under paragraph 1 of the proposed agreement, the Japanese Govern- 
ment would be ready to agree to that proposal. 

Baron Shidehara pointed out that that should be arranged be- 
tween the authorities of the two countries. 

Dr. Sze said that that was so, but he wanted to know what Baron 
Shidehara thought Japan would do in such circumstances. 

Baron Shidehara remarked that that was rather an academic 
question. 

Dr. Sze said that that was not an academic but rather a concrete 
case. He wanted to be clearly informed as to every phase of the 
arrangement. 

Baron Shidehara said that the meaning of his proposal was this: 
If China should give notice to take over the protection of the rail- 



224 

way at the Tsiiianfu end on. say, February 1 or 15, and if the au-' 
thorities of tlie two nations found that that date was quite prac- 
ticable, then on that date China would send her men and Japan 
withdraw her troops at once. 

Baron Shidehara said that the Chinese delegates had offered to 
arranoe that in no case the withdrawal should extend beyond the 
date of the comin^j into force of the present agreement. He had 
said " from the date of the signature." What difference could there 
be between the two? As he had explained several times before, the 
date of the coming into force would be very indefinite, while the 
date of tlie signature Avould ))e more easily foreseen. 

Dr. Sze said that Avhat he had in mind was to avoid any misunder- 
standing on the part of the Chinese people, who had no access to the 
proceedings of the meeting. What he had been proposing had been 
proposed from his anxiety to forestall any misconception by the 
public. 

Baron Shidehara said that there would be good reason in explain- 
ing to the people. The original offer made l3y Mr. Obata had con- 
tained no date of the Avithdrawal of the troops. The Chinese dele- 
gates could noAv say to the people that Japan agreed to complete the 
withdrawal Avithin six months. 

Dr. Sze said that six months was a long time. If there were 3,000 
officers and men, it would come to the withdrawal of 9 men a day. 
Baron Shidehara said that it was not necessarj'^ to wait until the 
expiration of the six months. If the Chinese delegates took para- 
graph 1 and paragraph 2 of his draft formula, the meaning would 
be entirely clear. The Japanese plan would seem to him better cal- 
culated than the Chinese formula to prevent misunderstanding in- 
stead of creating it on the part of the general public. According to 
the Chinese draft there Avas, after all, no fixed date. If by any 
means ratification should be indefinitely dela^^ed, there would be no 
basis for calculation of the period of time within which the troops 
should be withdraAvn. 

Dr. Sze said that at any rate six months seemed to him to be too 
long. If the Japanese delegates agreed to make it shorter, the Chi- 
nese delegates Avould AvaiA^e aside all other discussions in this matter. 
Baron Shidehara said that he did not think six months was very 
long. If the present agreement was to be signed on the 20th of this 
month, the AvithdraAval would haA^e to be completed by the 20th of 
next July. He did not think that people would say that Japan 
wanted to protract the withdrawal. 

Dr. Sze asked if Baron Shidehara did not think one month enough. 
Baron Shidehara answered that he certainly thought that period 
to be short. Before making any agreement Japan had to be perfectly 
sure that the agreement could be carried out. He had at first pro- 
posed nine months. He had since consulted military experts of his 
delegation. They had said that if the whole thing was done with 
expedition they might be able to effect the withdrawal in six months, 
so he had noAv proposed that shorter period to meet the Chinese 
desire to remoA^e misunderstanding by fixing a definite date for the 
complete withdraAval. He did not know hoAV the Japanese troops 
were distributed, but he would suppose that withdrawal in some 
cases would take a comparatively short period, while in other cases 



225 

it might take five or even six months. He and his colleagues really 
hoped, however, that as a matter of fact Avithdrawal would be effected 
earlier. 

Dr. Sze asked whether, when he said five or six months, Baron 
Shidehara had in mind the removal of the barracks, etc. 

Baron Shidehara said he did not have the barracks, etc., in his 
mind. As he had said on a previous occasion, these military estab- 
lishments might be of use to China for her police force. The ques- 
tion of the period of withdrawal was not one of years, but only of 
months. He did not like to have the matter subjected to bargaining. 

Dr. Sze said that if one month were considered too short it might 
be made two months. 

Baron Shidehara begged Dr. Sze not to treat the proposition as a 
matter of bargain. The military men in the Japanese delegation 
had said it was safer to put it six months. 

Dr. Sze said that even the Germans, when they had been bidden 
to withdraw their troops from outside the leased territory, had 
requested only four months in Avhich to effect the withdrawal. It 
should not be said that Japan requested 50 per cent more time. 

Baron Shidehara pointed out the difference betAveen tlie two cases, 
both in regard to the number of troops and the distance of their 
transportation. 

Dr. Sze said he would urge upon the Japanese delegates to sub- 
stitute " six " with " two " in regard to the number of months in the 
Japanese formula. That would show Japan's readiness to make 
good her avowed intention. 

Baron Shidehara said that he was not a military man, and that, 
moreover, he had no local knov\dedge. He had consulted military 
experts, and they had said six months was barely enough. He did 
not know if it was practicable to fix an earlier date. The whole 
matter was not a very important question either. It would be un- 
fortunate to postpone the discussion of the matter on a difference 
of three or four months. The Japanese delegates were not in a 
position to offer a shorter period, because the period of six months 
had been offered on the authority of military men. In anj^ case, 
that was proposed as the maximum. As a matter of fact, however, 
he hoped the withdrawal would be effected in the shortest possible 
period of time. 

Dr. Sze said that he would, therefore, appeal to the Japanese 
delegates not to insist upon the maximum period. The whole de- 
sire of the Chinese delegates was that they should be able to say 
that the Japanese troops were going to be withdrawn in a shorter 
period than the Germans had requested in a similar case. 

Baron Shidehara said that he did not think people would con- 
sider six months too long. The question was one of practicability. 

Dr. Sze suggested that if no agreement could be reached as to the 
period that point should be put aside for the time being. As to 
the next paragraph of Baron Shidehara's plan, he would say, as 
Dr. Koo had pointed out, that the mention of distinct understanding 
as to the protection of the railway property and the persons and 
property of foreign residents was not acceptable to- the Chinese dele- 
gates. 

Baron Shidehara asked the reasons for the objection on the part 
of the Chinese delegation ? 



- \ 



226 

Dr. Sze said that the insertion of such a special understanding 
was a reflection upon the Chinese railway forces. There were trea- 
ties between Japan and China in regard to the protection of Japanese 
nationals in China. There would, therefore, seem no necessity for 
such special proAdsion. 

Baron Shidehara said that if there Avas any objection on the part 
of the Chinese delegates to make the third paragraph a distinct 
condition in this article, he would be ready to have it stricken out. 
He would propose, however, that this distinct understanding should 
be recorded in the minutes of the meeting. 

Dr. Koo said that the Chinese delegates had no objection to the 
suggestion if it was understood that China was to accord to the 
persons and properties of Japanese nationals such degree of protec- 
tion as was entailed by the general principles of international law. 
He supposed that the Japanese delegates Avere not requesting any 
higher standard of protection for Japanese nationals and properties 
than for other nationals in China. 

Baron Shidehara ansAvered that certainly no special protection was 
being requested. 

Dr. Sze said that Avith reference to the final paragraph of Baron 
Shidehara's formula, the Chinese delegates wished' that the Avith- 
draAval of the Tsingtao garrison should be completed not later than 
the date of the transfer of the administration of the leased territory. 
Tsingtao was not a very large city, and 900 was a good-sized number 
of troops for the city. He would appeal to the Japanese delegates 
that they might see their way to agree to his suggestion. When the 
transfer should take place the Chinese GoA-ernment would afford this 
ncAv administration of Tsingtao every facility for the successful gov- 
erning of the locality and see that all impediments were remoA^ed for 
them. He Avould therefore ask the period of 30 days in the Japanese 
formula should be stricken out. 

Baron Shidehara said that it was also a question of practicability. 
The Japanese troops Avould certainly not wait idle after the transfer 
of the leasehold had been completed. 

Dr. Sze said that Avith good will on both sides it would be quite 
practicable. 

Baron Shidehara said that, practically speaking, the disposition of 
military transports Avas not an easy matter with the Japanese Gov- 
ernment. It was possible that when the transfer of the leasehold was 
completed at a giA-en date the necessary transport facilities would 
not be there in time. There were no large number of transports be- 
longing to the GoA'ernment, and it might be necessary to make special 
arrangements with shipping companies. 

Dr. Sze said that it might be so arranged that the transport should 
arri\-e in port a few days in advance. 

Baron Shidehara said that in any case it was not the Japanese 
intention to let the soldiers remain idle in Tsingtao. He would, 
however, suggest changing his formula so as to read " as soon as 
possible within 30 daj'S." There was absolutely no reason why Japan 
should prolong the stay of the soldiers if it could be avoided. 

Dr. Sze said that after the administration of the leasehold had been 
taken oA^er the Chinese authorities would take steps to protect the 
place and Avould send troops to the locality. If Japanese troops 



227 

should still be there, there would be caused, he was afraid, a jjood 
deal of inconvenience. 

Baron Shidehara said that, of course, when the transfer was com- 
pleted, it was understood that the Japanese garrison would not exer- 
cise any authority at all in Tsingtao. 

Dr. Sze said that it was not that. The question was that there 
would be Chinese troops there and also a large body of Japanese 
troops. This circumstance itself would cause a good deal of incon- 
venience on both sides. The Chinese delegates were anxious to avoid 
untoward incidents as far as was humanly possible. 

Baron Shidehara asked if it was thought that the Japanese might 
make any selfish use of the 30 days allowed them. The earlier the 
withdrawal was effected so much the better would it be for Japan; 
but it might be necessary for the troops to wait for the arrival of the 
transport. Thirty days was quite a modest period of time. He hoped 
that the Chinese delegates would accept his proposal as to period, 
both in paragraph 2 and paragraph 4, so that the whole question could 
be arranged. 

Dr. Sze said that as regarded the period in paragraph 2, Baron 
Shidehara had offered nine months at first and then six months. He 
hoped that the third offer would now be made. 

Baron Shidehara said that there should be no bargain on such a 
matter as dates and periods. Military men said that six months was 
necessary. They had to follow the opinion of experts in a matter 
like that. 

Dr. Koo suggested that to expedite progress the proposals of both 
sides might be combined. There had been agreement in substance, 
only the question of practical arrangement, or rather of foresight, 
remaining undecided. He would suggest to change the last paragraph 
of the Japanese formula so as to make it read : 

" The withdrawal should be completed as far as possible by the 
date on which the transfer of the leased territory is made, and in any 
case not later than 30 days from such date." 

Baron Shidehara said that he did not quite like the idea of the 
phrase " by the date," for that sounded as if it was contemplated to 
withdraw the troops before the transfer of the leased territory. 

Dr. Koo said that it did not mean that it was obligatory upon Japan 
to withdraw before the transfer. The troops might stay there if it 
was necessary. 

Baron Shidehara suggested the phrase " simultaneously with the 
transfer " in place of " by the date," etc. 

Dr. Koo said that if Baron Shidehara preferred that long word 
to the two simple words he would agree to the suggested change. 

The formula finally agreed upon is as follows : 

" The Japanese garrison at Tsingtao shall be completely withdrawn 
if possible simultaneously with the transfer of the administration of 
the leased territory of Kiaochow, and in any case not later than 30 
days from the date of such transfer." 

Baron Shidehara said that the question of six months was the only 
one now remaining. 

Dr. Sze said that in view of Dr. Koo's complete surrender on para- 
graph 1, he (Dr. Sze) hoped Baron Shidehara would concede on para- 
graph 2. 



228 

Dr. Koo said that he did not wish to appear to be bar<>aininp:, but 
he did feel that six months was much too lon<>'. He wouhl ask 13aron 
Sliidehara to sii<x^est a compromise. 

Baron Shidehara said it was difficult for liim to make modifications. 
He had obtained the fi<iure from military exj^erts. If he were to. offer 
a shorter period, these military men might say that the plan was im- 
practicable. He had asked tliem to give him the shortest possible 
]/eriod. and they had told him that six months was the shortest period 
in which to effect the contemplated withdrawal. 

Dr. Koo still insisted. 

Baron Shidehara said that, if practicable, he would have no objec- 
tion at all to making the period shorter, but military experts thought 
a shorter period impracticable. That was the difficultj^ He did not 
think that there could be misunderstanding in the public mind if 
the period of six months were to be agreed upon. 

Dr. 8ze asked if it was proposed that the question of period should 
he left until the following day. 

Baron Shidehara wondered if a wording similar to that adopted 
in regard to the Tsingtao garrison might not be adopted in regard 
to the railway guards, so as to change his formula as follows: 

''And the entiie withdrawal of such .lapanese troops shall be 
effected, if possible, within three months, and in any case not later 
than six months from the date of the signature of the present 
agreement." 

Dr. Koo said that in the first paragraph, after the words" Tsingtao- 
Tsinanfu IJailway,"'' there was the phrase "and its branches." He 
would suggest to add " and other parts of Shantung." The Chinese 
delegates understood that Japan maintained a small number of 
troops at the mines. They supposed that these troops would also 
be withdrawn. 

Baron Shidehara answered in the affirmative. He thought, how- 
ever, that in any case the word " branches " covered the troops sta- 
tioned near the mines. 

Dr. Koo asked if it was the baron's opinion that the w^ord 
" branches " could co^er mines and other properties appurtenant to 
the railwaJ^ He added that in the main the Chinese delegates in- 
tended to agree to the modified formula. He w^as only trying to 
suggest slight modifications as to the wording, 

Baron Shidehara thought that the word "branches" covered all 
those things Dr. Koo seemed to have in mind. They might, however, 
perhaps have it recorded in the minutes that the railway branches 
included mines, etc. 

Dr. Koo said that there might also be some factories which were 
being guarded b}^ troops. His idea was simply to avoid any possi- 
bility of difference in opinion when it came to the execution of the 
agreement. 

Baron Shidehara said that there were no troops assigned specially 
for the protection of factories. In any case the wording " along 
the railway " was inclusive of many thin'gs. 

Dr. Koo thought that the wording " other parts of Shantung," 
which occurred in the original Chinese formula, was preferable. 

Baron Shidehara said that it might give the impression that Japan 
had stationed troops all over the Shantung Province, 



229 

Dr. Koo said that the purpose of his inquiry was to ascertain 
whether, after this agjreement, there would be any more troops left 
in any part of the Shantung Province. If that point was clearly 
recorded in the minutes he would accept the modified formula. 

Baron Shidehara agreed. 

Dr. Koo, continuing, said that, in other words, the Japanese troops, 
including gendarmerie and other types of Japanese forces, should be 
withdrawn from along the railway. 

Baron Shidehara said that he would rather say "other types of 
military forces," because there was no police force stationed along 
the railway. 

Dr. Koo said that he would agree without compromising the posi- 
tion of China in regard to this outstanding question of police between 
the two Governments. He would further insert the words " or mili- 
tary forces " after the words " Chinese police force." 

Baron Shidehara said that he had just been informed that the 
military force in the Shantung Province was a bad type, consisting 
of undisciplined troops. He was afraid -trouble might be created 
unless well-disciplined troops were chosen from some other part of 
China. 

Dr. Koo said that the matter could safely be left to the Chinese 
Government. 

Baron Shidehara said that as a matter of fact he hoped that that 
point might be taken into consideration by the Chinese Govern- 
ment. 

Dr. Koo asked if this question of the withdrawal of the Japanese 
troops was now to be regarded as completed. 

Baron Shidehara answered in the affirmative. 

The final agreement on the entire question is as follows : 

''' The Japanese troops, including gendarmes now stationed along 
the Tsingtao-Tsinanfu Eailway and its branches, shall be withdrawn 
as soon as the Chinese police or military force shall have been sent 
to take over the protection of the railway. 

" The disposition of the Chinese police or military force and the 
withdrawal of the Japanese troops under the foregoing provisions 
may be effected in sections. The date of the completion of such proc- 
ess for each section shall be arranged in advance between the com- 
petent authorities of Japan and China. The entire withdrawal of 
such Japanese troops shall be effected if possible within three months, 
and in any case not later than six months from the date of the signa- 
ture of the present agreement. 

" The Japanese garrison at Tsingtao shall be completely withdrawn 
simultaneously, if possible, with the transfer of the administration 
of the leased territory to China, and in any case not later than 30 
days from the date of such transfer." 

Washington, D. C, Januanj 11^ 1922. 

SJC-22.] 

January 11, 1922. 
[For the press.] 

Issued hy the Chinese and Japanese delegations. 

The twenty-first and twenty-second meetings of the Chinese and 
Japanese delegates were held in the governing board room of the 



230 

Pun American Union Building at 11 a. m, and 4 p. m., respectively. 
Pending instructions from their Governments on the question of 
Tsingtao-Tsinanfu Kailway, the two delegations discussed the with- 
drawal of the Japanese troops along the railwa}^ and its branches 
and an agreement on such withdrawal was reached. The meeting 
adjourned at 7 p. m. until 11 o'clock to-morrow morning. January 12, 
1922. 



TWENTY-THIRD MEETING. 

The twenty-third meeting, held in governing board room, the Pan 
American Union Building, Washington, D. C, at 11 o'clock in the 
morning of Thursday, January 12, 1922. 

PRESENT. 

China. — Dr. Sao-Ke Alfred Sze, Dr. V. K. Wellington Koo, Dr. 
Chung Hui Wang. Secretaries : Mr. Hawkling Yen, Mr. T. C. Yen, 
Mr. T. F. Hsu, Mr. C. H. Zee, Mr. Chuan Chao, Mr. T. H. Koo. 

Japan. — Baron K. Shidehara. Mr. M. Hanihara. ISIr. K. Debuchi. 
Secretaries: Mr. S. Saburi, Mr. E. Kimura, Mr. H. Saito, Mr. T. 
Shiratori. ^ / 

Also present as observers : 

The United States of America. — INIr. John A"an A. MacMurray. 
Mr. Edwai-d Bell. 

The British Empire. — The Eight Hon. Sir John Jordan, G. C. I. E., 
K. C. B., G. C. M. G. ; Mr. M. W: Lampson, M. Y. O. 

THE EXTENSIONS OF THE SHANTUNCi RAILWAY. 

Dr. Sze said he understood that the question of the extensions of 
the Shantung Railway was to be discussed to-day. Pie desired that 
more elucidation might be given to article 5 of the Japanese note 
of September 7, 1920. 

Baron Shidehara said he could not quite see in what respect that 
article required further elucidation. The Japanese position was that 
Japan held certain rights in relation to the extensions of the Shan- 
lung Railway as well as options for the construction of ^he Yentai- 
Weihsien Railway, and that she was prepared to throw them open 
for the common activity of the international consortium. She did 
not now insist that she alone should build the railways, and that 
those rights should be held exclusively by Japan. 

Dr. Sze said he desired to be informed what was meant by the 
"extensions" of the Shantung Railway; whether the Ivaomi-Hsii- 
chow and Tsinan-Shunteh lines were meant. 

Baron Shidehara replied in the affirmative. He noticed, however, 
that the preliminary contract between the Chinese Government and 
the Industrial Bank of Japan contained provisions that "to assure 
the success of the Tsinan-Shunteh and Kaomi-Hsuchow lines as a 
railway enterprise, if the location of the lines should be found not 
advantageous, the Government may arrange with the banks to change 
the location of the lines." Therefore, the exact location of the lines 
was subject to alterations by mutual agreement between the Chinese 
Government and Japanese banks. 



231 



Dr Sze said that, so far as that exact point was concerned, theie 
were previous cases in which the location of the lines had been modi- 
leTirtheactuS construction of the lines. For instance, the original 
contract of the Tientsin-Pukow Railway had not had Pukow as a 
'terminus but later, when the line was to be built, Pukow was selected 
inX sime manAer, certain points in the contract regarding the 
iranchlinesof the Shantung Railway could be c^^^^^^^ 

Baron Shidehara confirmed his statement that by t^ie term ex 
tensLns '' the two lines mentioned had been in the mmd of the Japa- 
-nese Government. 



THE TENTAI-WEIHSIEN RAILWAY. 



Tlr S/e said that as to the Chefoo-Weihsien Eailway, the Chefoo 
T,eSiehadexpSed their wish to build the line themselves, bo 
fonT as they «uld raise the funds for the construction of the line 
Ihemselves! ttiere was no occasion for them to borrow money from a 

*"Slfl"hai? inquired whether he could be informed how far 
thf project of the Chinese people for the construction of the \entai- 

"^Sf Szet^lSt'afe Kui^'chamber of Commerce had passed 
^ S solution to have the railway" built by the local people. A com- 
pany was being organized to finance the construction of the line. 
"^ Taron Shidfhart desired to know whether necessary funds had 
already been raised. , , ^ , , 

Elrol^^^TSk^^^^^^^^^ Chinese Government liad 

already given permisison or license to the Chinese financial group for 
the construction of the railway. ^^ ^ 

Dr Sze said that he was not very clear on that point. |T, now 
ever the local people would say that they could raise the funds, or 
ihat'they had p\ed'ges to supply the. funds it -«f .^^e ^^^^^^^^^^ 
for the Government to refuse their offer. The first opportunity 

nt'onSC: Sd":; Dr. S^e had been referring to the 

"sfe^e^Uerthat^'irrhTrmeant the Shantung Chamber of 
<^ommerce a chamber of commerce of the Shantung people. He 
^dded thai the Ce in question was a very short one and the local 
r.Ponle were ready to finance its construction. ^ ^ ,• a .f 

^ Baron Shidehara stated that he had understood that m August 
-ic^v^tW Chinese ministry of communications had stated, m reply to 
in fppHcatiin SZchfnese merchants at Chefoo for constructing 
the YeS-Weihsien Railway, that, in view of the bearing of the rail- 
way upon diplomatic relations of China, and, further m view of the 
Tar^e amount of expenditure involved in the construction of the line, 
HAvas the policy of the Chinese Government to construct the rail- 
iri a Government enterprise. He desired to know whether that 
Sv of the Chinese Government had subsequently been modified. 
^Dr Sze said that what Baron Shidehara had referred to had 
occ^irred in 191:3^ Since that time a great many. things had hap- 
pened Ind needless to say, circumstances had con.siderably changed 
Cview of diat fact, the Chinese Government would no longer 



232 

interpose objections to the bnildino; of the line by the people them- 
selves. Chefoo itself had undergone changes. Since those days 
harbor works had been greatly improved. It would be in the inter- 
ests not only of the Chinese merchants but also of the foreign resi- 
dents at Chefoo that the projected railway should be built at an 
early date. That extra feeder would also benefit the Shantung 
Kailway itself. So long as the local merchants themselves could sup- 
ply funds, it Avould be advisable to let them build the railway. 
Therefore, if a draft formula was to be drawn up, only the Tsinan- 
Shunteh and Kacmii-Hsuchow Eailwa^^s should be referred to. 
Those two lines might be assigned to an international financial body. 

Baron Shidehara said that he had understood that the project of 
the Chinese Chamber of Commerce had not yet come to a concrete 
form. The Chinese (jovernment had not yet given any license, and 
the project for the construction of the railway did not seem to have 
materialized as yet. He desired to be informed whether Weihsien, 
instead of Kaomi. had been decided upon as the terminus of the pro- 
jected railway. 

Dr. Sze said tliat Lungkow was going to be tlie terminus. 

Baron Sliideliara, said that, as the Chinese delegates would re- 
member, article 2 of tiie Shantung treaty of 1915 was Very explicit 
on the point under discussion. It provided that the Chinese (Tovei'n- 
ment should, in the event of (Ternumy surrentlering her right of pro- 
viding capital for the Chefoo- Weihsien Kailway line, enter into nego- 
tiations Avith Japanese capitalists for the purpose of financing the 
said undertaking. A strict interpretation of this article seemed to 
be that it was obligatory upon the Chinese Government to enter into 
negotiations Avith Japanese capitalists in case the construction of 
the railway was undertaken, but if there was any definite plan for 
the Chinese merchants to construct the railway, Japan would not 
insist U})on Avhat seemed to l)e clearly the rights of her nationals. 
She would raise no objection to the project. 

Dr. Sze said that it was best for the present to limit the conversa- 
tions to facts as they were and not enter into any academic discus- 
sion. He was glad to hear Baron Shidehara state that Japan would 
not interpose any objection to the Chefoo-Weihsien Raihvay being 
financed by Chinese merchants themselves. 

Baron Shidehara said that it would, of course, be needless for him 
to say that if the railway Avere to be constructed Avith foreign capital 
Japan would have to insist upon the matter of financing being placed 
Avith the international financial consortium. When he agreed that 
the railway should be constructed by Chinese merchants it Avas on 
the understanding that it would be done exclusively with Chinese 
capital. 

Dr. Sze said that, wdth the permission of the Japanese delegates,, 
he Avould ask Dr. Koo to read a formula he had drafted on the 
question of the extensions of the Tsingtao-Tsinanfu Raihvay. 

Dr. Koo said that since there hacl been a practical agreement 
so far as the Chefoo-Weihsien RailAvay w-as concerned, the draft 
formula he Avas noAv going to propose had reference only to the exten- 
sions of the Tsingtao-Tsinanfu Railw^ay. As to the construction of 
the Chefoo-Weihsien Railw^ay, he Avould. of course, raise no objection 
to the statement made by Baron Shidehara upon that subject being 
inserted in the minutes of the meeting. 



233 

THE TSINANFIT-SirUTSrTEH AND KAOMI-HSUCHOW RAILWAYS. 

Dr. Koo's formula read as follows : 

" The concessions to build the two extensions of the Kiaochow- 
Tsinanfu Eailway, namely, the Tsinan-Shunteh and Kaomi-Hsu- 
chowfu lines, will be granted to an international financial body in 
which Chinese and Japanese capitalists are both represented on terms 
to be arranged between the Chinese Government and the said inter- 
national financial bod5^" 

Continuing, Dr. Koo said that there was in his formula only a 
little alteration in the phraseology as compared with article 5 of the 
Japanese note of September T, 1921. 

Baron Shidehara said that he was not sure if in Dr. Koo's for- 
mula was made clear the point he had mentioned a moment ago. 
As he had explained, the Chinese Government, by their contract of 
September 24, 1918, entered into with the Industrial Bank of Japan, 
had undertaken that the construction of the projected railways 
should be financed by the Japanese banking group. Since that time 
the international financial consortium had been organized, and when 
the representatives of several banking grouj^s of the consortium had 
met at New York the representative of the Japanese banking group 
had stated that the Japanese group would be ready to pool those con- 
cessions, with the consortium ; so the situation was this, that the 
Japanese banking group had already obtained rights in regard to 
those projected railways and that they had undertaken to pool those 
rights with the consortium. There was no question of newly grant- 
ing any rights to the financial consortium. While he did not quite 
remember the wording of Dr. Koo's draft, he hoped that the above 
point would be made clear. 

D(r. Sze said that the Chinese delegates had no official knowledge 
of what had transpired at the meeting in New York. No Chinese 
representatives had taken part in the deliberations. 

Baron Shidehara said that there had been no Chinese participa- 
tion, but that was not the point. The Chinese Government had en- 
tered into a contract with the Industrial Bank of Japan in 1918. 
The Japanese banking group, at the invitation of the financial con- 
sortium which had since been called into existence, had offered to that 
financial body the rights they had acquired by that contract. 

Dr. Sze said that any understanding to which China was not a 
party Avas not binding upon the Chinese Government. 

Baron Shidehara said that the Chinese Government had entered 
into a contract with Japanese banking interests. 

Dr. Sze said that he did not have the contract before him and did 
not know whether the Chinese Government had granted the Japanese 
bank the right to transfer their rights without previous agreement 
with the Chinese Government. 

Baron Shidehara wondered whether, when the Chinese delegates 
seemed to question the right of the Japanese banking group to 
transfer those rights without the express consent of the Chinese 
Government, it was intimated that these rights should be held by 
the Japanese banking group instead of being offered to the con- 
sortium. 

Dr. Sze answered in the negative. He added that the point Baron 
Shidehara had been making was that there was no question of any 



234 

new concession beini>: offered to the consortium. But. as a' matter of 
general principle, the Cliinese (jovernment could not feel bound by 
any understanding or arrangement in Avhich the Chinese Govern- 
ment had not officially participated. 

Baron Shidehara asked if the Chinese delegates did not recognize 
that the Chinese Government was bound by an agreement which it 
had concluded with the Japanese banking group. 

Dr. Sze admitted that the Chinese Government was bound by any 
agreement properly entered into. He wondered, however, if Barorh 
Shidehara had not objected to Dr. Koo's draft formula. 

Baron Shidehara said that it was because the formula seemed tot 
convey the idea that concessions w^ere being newly created. 

Dr. Koo said that his draft had been made simply to incorporate 
the substance of paragraph 5 of the Japanese note w ithout trying to 
conceal any profound meaning. Baron Shidehara had pointed out 
that the Japanese banking group had already agreed to transfer their 
concessions to the international financial body. He considered it; 
appropriate to point out that such concessions originally granted by 
the Chinese Government could not be transferred to a third party 
without the consent of the Chinese Government. The Chinese 
Government had not so far given any such consent to the transfer. 
As far as the relationship between the Chinese Government and the 
international consortium was concerned in regard to this particular- 
question, he felt that some formality had to be gone through before 
this financial body could properly take over these concessions. When- 
it Avas said, in the Japanese note, that these rights Avould be thrown 
open, etc., the expression seemed so definite that it conveyed the 
impression as if there were no doubt w^hatever as to the ultimate 
destiny of these concessions. 

Baron Shidehara said that the Japanese banking group would, 
however, not be satisfied. The bankers would say that they had ob- 
tained special rights from the Chinese Government. 

Dr. Sze said that the fact of the present discussion being held was 
proof that the Japanese bankers had some interest in the projected 
railway. 

Baron Shidehara wondered whether the Chinese delegates' mean- 
ing was that, in turning over to the international consortium the 
rights held by the Japanese banking group, it would be necessary 
to obtain the consent of the Chinese Government. 

Dr. Koo replied that that was practically what they meant. 

Baron Shidehara said that with suitable changes in the present 
formula the idea could be clearly brought out. 

Dr. Koo said that the turning over to the international financial" 
body of tlie concessions should be done by both China and Japan. 
He understood that the Japanese bankers had already turned them 
over to the international body. The next step would be for the 
Chinese Government to turn over the concessions to the consortium ; 
hence, the term " granted " in his proposed formula. 

Baron Shidehara remarked that it was not the Chinese Govern- 
ment, but the Japanese bankers, that would turn the rights over tO' 
anybody. The rights had been in the possession of the Japanese 
bankers. 

Dr. Koo said that Japan had, nevertheless, already turned them, 
over to the international group. 



235 

Baron Sliidehara said that the Japanese ])ankeis had only under- 
taken to turn them oA^er, but no definite arrangement had been made. 

Mr. Hanihara stated that Japan had promised to hand over the 
rights, but so far no act of transfer, or " pooling," had as yet been, 
completed. 

Dr. Koo said that, so far as the Japanese capitalists were con- 
cerned, they had already offered to "pool" their rights. It only 
remained for the Chinese Government to agree to the transfer to 
the international group. 

Mr. Hanihara said that the Japanese capitalists had only made a 
promise. 

Dr. Koo said that in that case he could understand that the Jap- 
anese capitalists were only obligated to effect the transfer. In that, 
case the wording of his draft formula could be retained. The word 
" granted " implied that the act of granting would be effected con- 
jointly by Japan and China. The draft did not say " will be granted 
hy CMna.y Similar phraseology was used in the original Japanese^ 
proposal, the Avords " thrown open " being used absolutely. 

Baron Shidehara said that the meaning of the Japanese proposal 
w^as based on the assertion that the right of financing the railway 
had been held by the Japanese banking group. That right the 
Japanese bankers alone could turn over to anybody else, but not the 
Chinese Government. 

Dr. Koo stated that, unless the Chinese Government gave its con- 
sent, the transfer would not be valid. 

Baron Shidehara said that if China did not give her consent, the 
right would ren^ain with the Japanese bankers. 

Dr. Koo said he would suggest modification in his draft to meet: 
the Japanese wishes, so as to make it read : 

" It is agreed that the concessions to build the two extensions of 
the Kiaochow-Tsinanfu Railway, etc., will be thrown open for the- 
common activity of an international financial body, etc." 

Baron Shidehara inquired wliether by " an international financial 
body " the Chinese delegates had it it mind to refer to some other 
financial body than the existing international financial consortium. 

Dr. Sze remarked that " consortium " was a German word which 
he did not like to use. 

Baron Shidehara asked whether it Avas simply the phraseology that 
the Chinese delegates objected to. He added that, as the matter 
stood at present, the international financial consortium consisted of 
American, British, French, Japanese, and perhaps also Belgian bank- 
ing groups. Chinese capitalists were not represented on that body. 
He understood that an application had come from Chinese bankers 
to have themselves represented there, and the admittance of the 
Chinese representatiA'es had been, if he remembered right, under 
discussion by the representatives of banking groups already members 
of the consortium. It was difficult for Japan to commit herself in 
that respect pending decision by the consortium groups. 

Dr. Sze said that, iudging from Avhat Baron Shidehara had just 
said, he thought that he had been right in trying to avoid the use 
of the word "consortium." Its formation was still in a nebulous 
stage. 

Baron Shidehara said that the consortium was not in a nebulous 
form. The Belgian group had applied to become a member, and the 



23() 

consortium had already expressed its readiness to admit it. But 
that was only the question of the membership. The consortium it- 
self had beeai lawfully oroanized. The question of allowing the 
participation of other groups would depend upon the decision of the 
groups already forming the international body, which was now a 
concrete entity. 

Dr. Sze wondered whether Baron Shidehara had meant that the 
consortium had been formed, but its members had not been decided 
upon. 

Baron Shidehara replied in the negative. The consortium had 
already been formed. Only new groups might be added to its 
membership. It might be likened to the League of Nations in that 
respect. 

Dr. Sze said that for the members of the League of Nations the 
formation of the league might have been complete, but for non- 
members it was not officially in existence and they would in no sense 
be bound by it. 

Baron Shidehara stated that it was quite clear that the consortium 
had been formed and Avas in existence. The question would be 
whether new members should be allowed to come in. That did not 
in any sense affect the organization of the consortium. 

Dr. Sze inquired whether it was the idea of Japan to exclude 
Chinese capitalists. 

Baron Shidehara said that he was not able to commit himself on 
that point Avithout the consent of the members of the consortium. 

Dr. Sze inquired what Baron Shidehara desired to propose. 

Dr. Koo said that the Avhole difficulty really appeared to be this : 
The Chinese Covernment had no particular objection to entering 
into relation with the consortium, but the question still remained 
outstanding and so far the conversations Avhich had taken place from 
time to time between the Chinese Government and the consortium 
had not led up to a definite agreement. The Chinese delegates did 
not feel justified to commit the Chinese Government in its relations 
with the consortium. On the other hand, the Chinese capitalists in- 
terested would at once raise the question, if the concession were to 
he turned over to the international financial group, why they shoijild 
not be included in the consortium. They desired to enter into the 
the international group, and his information was that the present 
members of the consortium Avere Avilling to invite the Chinese bankers 
to join. The relation between the Chinese bankers and the con- 
sortium was in the process of crystallization. He had had the above 
situation in mind Avhen he had adopted the phraseology, " an interna- 
tional financial body in which Chinese and Japanese capitalists are 
both represented, etc." 

Baron Shidehara wondered Avhether the Chinese delegates could 
not accede to the modified formula, reading as foUoAvs : 

" It is agreed that the rights granted by the Chinese Govern- 
ment to the Japanese financial group under the contract Avith the 
Chinese Government of September 28, 1918, relating to the two 
extensions of the Kiaochow-Tsinanfu Railway, namely, the Tsinan- 
Shunteh and the Kaomi-HsuchoAvfu lines, Avill be thrown open for 
the common activity of an international financial body, on terms to 
be arranged between the Chinese Government and the said financial 
body." 



237 

Dr, Koo wondered whether Baron Shidehara had added anything 
to his (Dr. Koo's) formula, except in one respect; that was, that 
Baron Shidehara had given nnich fuller description to the con- 
cessions. He was afraid that such full description might give rise 
to misapprehensions and misunderstandings. Both delegations were 
talking about the same thing. If so, there would be no need of de- 
scribing it as had been proposed by Baron Shidehara. As to the 
latter part of the formula just proposed, however, the Chinese dele- 
gates had no objection. Further, he wondered whether "conces- 
sions " would not better be substituted for the word " rights." The 
former was in more frequent use. 

Mr. Hanihara remarked that the contract referred to in the 
Japanese formula did not provide for concessions to build the rail- 
wars, but for the rights to finance it. 

Dr. Koo said that in that case such phraseology as " concessions 
relating to the building of the railway " might be used. 

Mr, Hanihara said that whatever word might be used, it did not 
.seem to him that the point he had mentioned could be made clear. 
The contract referred to had been published long ago. It was now 
public property. There was no use avoiding reference to it. 

Dr. Koo said that the Chinese delegates were now discussing the 
matter Avitli the Japanese representatives, and not with anybody 
else. That very fact would be sufficient indication. As a matter 
of fact, the Chinese delegates were adopting the whole Japanese 
paragraph excepting the one little word " rights," wdiich they sug- 
gested to make " concessions." 

Baron Shidehara said that, in order to meet the Chinese washes, 
he would suggest a new formula, avoiding special reference to the 
contract of 1918, reading as follows : 

" It is agreed that the concessions relatinq to the two extensions, 
«tc." 

He desired that at the same time it should be recorded in the 
minutes that the concessions as above referred to meant the rights 
which had been stipulated in the contract of September 28, 1918. 

Dr. Koo said that if the Japanese delegates desired to enter that 
point in the minutes he had no objection. He then suggested to 
substitute the word "group" for "body." 

The final agreement read as follows : 

" It is agreed that the concessions relating to the twx) extensions 
of the Tsingtao-Tsinanfu Railway, namely, the Tsinan-Shunteh and 
the Kaomi-Hsuchowfu lines, will be thrown open for the common 
activity of an international financial group on terms io be ar- 
ranged between the Chinese Government and the said group." 



TWENTY-FOXTRTH MEETING. 

The twenty- fourth meeting, held in governing board room, the 
Pan American Union Building, Washington. D. Cat 3 o'clock in 
the afternoon of Thursday, January 12, 1922. ' 

93042—22 16 



238 

PRESENT. 

China. — Dr. Sao-Ke Alfred 8ze, Dr. V. K. Wellingrton Koo, Dr. 
Chung Hiii Wang. Secretaries : Mr. Hawkling Yen, Mr. T. C. Yen, 
Mr. T. F. Hsu, Mr. C. H. Zee, Mr. Chuan Chao, Mr. T. H. Koo. 

Japan. — Baron K. Shidehara, Mr. M. Haniliara, Mr. K. Debuchi. 
Secretaries: Mr. S. Saburi, Mr. ¥.. Kimura, Mr. H. Saito, Mr. T. 
Shiratori. 

Also present as observers : 

The United States of America. — Mr. John Van A. MacMurray, 
Mr. Edward Bell. 

The British Empire. — The Eight Hon. Sir John Jordan, G. C. 
I. E., K. C. B., G. C. M. G. ; Mr. M. W. Lampson, M. V. O. 

OPENIN(} OF THE PORT. 

Dr. Sze said that in regard to the opening of Tsingtao as a port 
of trade, it had been proposed in the Japanese note of September 7 
that foreign nationals coming into China were not permitted to en- 
commerce, industry, and agriculture. He would point out, however, 
that foreign nationals in Tsingtao should be permitted to carry on 
gage in agriculture and that the same rule must apply to Tsingtao. 
As to the phrase '' other lawful pursuits "' in the said Japanese note, 
he desired to mention the fact that there might perhaps be pursuits 
which, while lawful, Avould have to be restricted either as a result 
of existing treaties or on account of the Chinese monopoly system. 

Baron Shidehara said that in the Chinese communication of Octo- 
ber 5. sent in reply to the Japanese note of September 7, it had been 
stated that agricultural pursuits concerned the fundamental means of 
existence of the people of a country and that according to the usual 
practice of all countries no foreigners were permitted to engage in 
agriculture. The Japanese delegates were not informed that there 
was such an- international practice of common acceptance. It was 
true that agriculture had intimate connection with the means of ex- 
istence, but it seemed to him that it ought to make no difference to 
China who supplied agricultural products to Chinese markets. He 
would suppose that China, with her cheap labor, would be able to 
compete successfully with foreign producers. But in any case the 
Japanese delegates had no intention of insisting upon the inclusion 
of agriculture among the rights of foreigners to be protected in this 
connection. As to Dr. Sze's question whether pursuits coming 
within the scope of the Chinese monopoly system were included in 
the term "lawful pursuits," he (Baron Shidehara) understood that 
as a matter of fact no Japanese Avere engaged in any such pursuits 
as belonged to Government monopoly in China. He could say, how- 
ever, that it was not the intention of the Japanese delegation to have 
such special kind of pursuits permitted to Japanese nationals in 
Tsingtao. In saying so, however, he would like to make it clear 
that this recognition on their part was entirely without prejudice to 
the position taken by them on the question of the salt industry. 

Dr. Koo inquired whether he was to understand that the Japanese 
delegates, while agreeing to his interpretation in regard to the terms 
" agriculture " and " lawful pursuits." desired not to prejudice their 
position in regard to the salt industry. 



239 

Baron Shidehara answered in the affirmative. 

Dr. Sze said that Japan, in asking the opening of Tsingtao as a 
port of international trade, wanted to have the entire extent of the 
leas3d territory inchided in the open port. As the Japanese dele- 
gates saw, the greater part of the leased territory was on the Tsingtao 
side, while there was only a small stretch of land on the left-hand 
side of the bay. For actual administrative purposes it would be in- 
convenient to include this small stretch on the left-hand side in the 
open port of Tsingtao. There was no road connecting this part Avith 
the main city district. As to the Tsingtao side, there was no ques- 
tion. He would only like to hear any observation the Japanese dele- 
gates might make as to what extent the undeveloped part of the 
leased territory should be included in the proposed Tsingtao open 
port. He assumed that they had no objection to the exclusion of the 
left-hand side, because it was not developed at all, the Germans 
having used it only for purposes of defense. 

Baron Shidehara said that he had no knowledge of the locality, 
but that it would seem that the left-hand side might become im- 
portant in future, when the right-hand side was still further devel- 
oped. It was true that the bay separated the two parts, but it was 
possible to cross the bay very easily by such means as ferryboats, etc. 
He hoped that the Chinese Government w^ould be able to include the 
left-hand side of the bay in the extent of the open port. 

Dr. Sze said that the left-hand side was only a small fraction com- 
pared to the right-hand side. 

Baron Shidehara said that with the development of the cit}^ dis- 
trict it might become necessary. 

Dr. Sze said that the development would be in the other direction, 
for there was no village at all on the left-hand side. It would entail 
extra expenditure upon the administration to liave to look after the 
left-hand side also. 

Baron Shidehara said that the leased territory itself was a small 
stretch of land all around the bay. It would be very easy to cross 
the narroM'Cst part of the bay. He thought it was about one-third of 
a mile. 

Dr. Sze said that it was more than 3 miles at the narrowest part. 

Baron Shidehara wondered if there were no houses on the left- 
hand side. If there were no people living on that side, it would 
cause no difficulty for the Tsingtao administration to take in that 
part. The entire district had beautiful climate, and Tsingtao might 
grow into a still more prosperous city. It was very possible that the 
left-hand side might also become quite important. 

Dr. Koo asked if Japan had any factories or industrial establish- 
ments on that side. 

Baron Shidehara had no local knowledge. 

Dr. Koo said that it seemed to him that with the groAvth of foreign 
trade the municipal district would naturally have to be extended to 
the left-hand side. So long as things now stood, the right-hand side 
would be sufficient for some time yet. 

Baron Sliidehara said that it might become important as trade 
grew. 

Dr. Koo said that naturally the question of extension would be 
taken into consideration by the Chinese Government when the 



240 

growth of fo-ei*rn trade required it. There would be no apprehen- 
sion on the part of the public on that score. 

Baron Shidehara said that he could not see any possible disad- 
vantage to China to have the left-hand side included. 

Dr. Koo said that there was no village on that side and it would 
not be advisable to extend administrative installations to that part. 

Dr. Sze said that originally the Germans had used that part only 
for naval base and not for trade. 

Baron Shidehara said that he should not wonder, because the Ger- 
mans had held the phice for strategic purposes. It was now going to 
be a port of trade, and it would be advisable to reserve that side for 
residential and trade purposes. Should that side become a pros- 
perous residential quarter, it would be entirely necessary to have 
the administration extended to this quarter. 

Dr. Sze said that when the Chinese delegates insisted upon the ex- 
clusion of tliat part it was not because of any desire on their part to 
limit the extent of the open port. Simply from the point of view 
of administrative expenditure, it would be advisable to open, for the 
time being, the right-hand side only, and later, when circumstances 
required, to open the left-hand side also. 

Baron Shidehara said that should there happen to be Japanese 
residents or factories, it would not be fair to cause them to remove 
to the right-hand side. 

Dr. Sze said that according to the Chinese information there were 
no residents at all. 

Baron Shidehara said that if there were no residents there ought 
to be no difficulty for the prospective administration, even if that 
part were to be included. 

Dr. Koo suggested to put in an added formula, in the following 
sense : 

'* Should the growth of Tsingtao require it, the Chinese Govern- 
ment will extend the municipal district to the left-hand side as well." 

Baron Shidehara asked if there was any practical necessity to ex- 
clude that part for the time being. 

Dr. Koo said that if that part was not developed and not needed for 
foreign trade, it would seem better to exclude it. It was simply a 
question of administrative expediency. 

Baron Shidehara said that he did not think the inclusion of that 
part would cause any inconvenience to the Chinese administration. 

Dr. Koo said that if it was included in the open port it would be 
open for foreign residents. Even if only half a dozen foreigners 
were to choose to reside in the part, the Chinese administration would 
be held responsible to extend adequate protection to them. 

Baron Shidehara said that under the German regime China had 
permitted foreign nationals to reside and carry on any pursuits on 
the left-hand side. He hoped that China would continue this same 
system, permitting foreign nationals to reside and carry on their 
trade within the entire area of the leased territory. 

Dr. Koo said that the right-hand side was a district of 193 square 
miles and he thought that it ought to be enough for the foreign resi- 
dents. It was simply a question of administrative expenses. 

Baron Shidehara said that at present the Tsingtao administration 
would not have to go to any extra expenses. Should that unde- 



241 

veloped part become prosperous it would be worth while to make 
administrative expenditure on that part. 

Dr. Sze said that the whole area of Hongkong was 29 square miles. 
Moreover, the Chinese delegates were readj^ to give assurance that if 
the growth of trade required it extension would be made to the left- 
hand side. 

Baron Shidehara said that the Chinese delegates must take into 
account the fact that formerly China had granted privileges to Ger- 
mans on the left-hand side of the bay. There would seem to be no 
good reason to now limit the area to a narrower extent. 

Dr. Koo said that he did not know if the Germans used that part 
for purposes of trade. 

Baron Shidehara said that he supposed not, but certainly the Ger- 
mans had the right to live in that part. It did not make any differ- 
ence whether they had really made use of that right. 

Dr. Koo said that if that part were included foreign nationals 
would be entitled to take up residence and start business there. If 
any large number of them were to go there it would be worth while 
to take proper administrative steps, but if only a handful should 
choose to go there the administrative expenditure incurred on their 
account would be out of proportion. 

Baron Shidehara said that if foreign nationals were to go to that 
part it would not be for the purpose of embarrassing the administ'-a- 
tion, but because of its being a better place to live in. He did not 
see why China should refuse to extend protection to them on the 
ground of expenditure. 

Dr. Sze said that the left-hand side was a barren stretch of land, 
and it would be very expensive to develop it. At the best it would 
become the abode of brigands, robbers, and other undesirable ele- 
ments. 

Baron Shidehara said that if the place was so lacking in wealth 
there would be no inducement for those robbers and brigands to go 
there. 

Dr. Koo suggested leaving that part aside for the moment. 

Baron Shidehara consented. 

Dr. Koo said that the Japanese proposal in regard to the opening 
of suitable cities and towns in Shantung coincided with the intention 
of the Chinese Government, because it was the purpose of the Chinese 
Government to select some suitable cities or towns in Shantung for 
the purpose of foreign trade. But the Japanese delegates would 
readily see why it was not advisable for the Chinese delegates to 
enter into any definite arrangement on this point. He would say that 
the same observation applied to the paragraph in the Japanese propo- 
sition with reference to the regulations concerning the opening of 
those places. In opening those places the Chinese Government 
would be animated mainly by their desire to promote foreign trade. 
It was naturally the purpose of the Chinese Government to so formu- 
late the regulations as might be most conducive to the promotion of 
foreign trade in Shantung. Tsinanfu was a city which had been 
opened by China on her own initiative. The Chinese delegates were 
not aware of any well-founded criticism leveled on the reG:uIations 
under which the city was being administered as a place of foreign 
trade. The foreign communitv were well satisfied with the muni ioal 



242 

government. He hoped that the Japanese delegates would be satis- 
fied with a declaration which China would make of her own accord 
along the line indicated above, and that they would not ask an express 
agreement on a matter which belonged to the domain of internal 
administration. 

Baron Shidehara said that the Japanese delegates were not much 
concerned about the form of the proposed agreement. What they 
were concerned about mainly was that actually the Chinese Govern- 
ment should open those places. If they would make a declaration 
of their own accord, signifying an intention to open suitable cities 
forthwith in Shantung, the Japanese delegates would not insist upon 
including the matter in the proposed agreement on Shantung. 

Dr. Koo stated that, as had been stated before, it was the intention 
of the Chinese Government to open such cities and towns. He did 
not know what more could the Chinese delegates say beyond what 
had been said. 

Baron Shidehara wondered if a declaration could not be given in a 
more formal way. He did not care about the form of the declara- 
tion if only it were a declaration of a little more formal character. 

Dr. Koo asked whether it was Baron Shidehara's idea that the 
formal declaration should be made in the minutes of the conver- 
sations. 

Baron Shidehara said that what he had in mind was something 
that could be published. 

Dr. Koo said that as he took it Baron Shidehara's observation in 
that respect applied also to the last paragraph of the Japanese 
proposal. 

Baron Shidehara said that with regard to the last paragraph of 
Article II of the Japanese proposal he gladly took note of Dr. Koo's 
statement that just and fair treatment would be accorded to all 
foreign residents. The purpose prompting that last paragraph was 
that with the best of intentions on the part of the Chinese Govern- 
ment there might be found some clause in the regulations to be made 
which might prove prejudicial to the legitimate interests of foreign- 
ers. Should any measure taken by the Chinese Government prove 
injurious to the interests of any foreign nationals, the Government of 
those nationals would have to lodge protest with the Chinese authori- 
ties. It was in order to avoid such unpleasant eventuality that the 
last paragraph had been inserted in Article II. but the Japanese 
delegates had no intention of insisting upon any clause which might 
cause embarrassment to the Chinpee Government, and they would be 
willing to strike out from the terms of the proposed agreement the 
last clause of paragraph 2. He wondered, however, if it would not 
be possible for the Chinese Government, as a matter of coui'tes3% to 
show the projected regulations to foreign Governments concerned. 

Dr. Koo said that he was not prepared to say anything in that 
respect. Any matter of courtesy might be more af)preciated if it 
came without being asked for. He was glad that the Japanese dele- 
gates consented to eliminate the last clause of paragraph 2. As to 
the opening of suitable cities and towns in Shantung, Baron Shide- 
hara had asked for a declaration which could be given publicity. To 
meet that desire, the Chinese delegates would make a recommenda- 
tion to their Government to make such a declaration as would answer 
the purpose. 



243 

Baron Shidehara wondered if it would not be possible that the said 
declaration should be made at the same time as the conclusion of the 
agreement which the two delegations proposed to sign here. 

Dr. Koo asked if it was Baron Shidehara's idea that a declaration 
here was preferable. 

Baron Shidehara said that it was in the nature of a supplementary 
declaration and might properly be published at the same time as the 
main body of the proposed treat}^ It happened very often that 
declarations were attached to treaties. 

Dr. Koo said that the Chinese delegates were disposed to make 
such a declaration at the same time as the proposed agreement, but 
that they could not see their way to making such declaration part of 
the agreement. 

Baron Shidehara said that a supplementary declaration was not 
part of the agreement. As would be remembered, the Chinese Gov- 
ernment had announced several times their intention to open suitable 
places in Shantung. The point was that China should now declare 
her intention to carry out that declaration. The actual fact was that 
close by the Shantung Railway and the Tsingtao leased territory 
there were already many Japanese residents. The Japanese Gov- 
ernment would like to obtain some assurance that these Japanese 
would not be expelled from their present places of residence. It was 
not proposed that that assurance should be contained in the body of 
the agreement itself, but in a supplementary declaration, so that 
those Japanese nationals might have a certain sense of assurance. 

Dr. Koo said that China was ready to make such a declaration, 
but she would like to make it as far as possible apart from the agree- 
ment. 

Baron Shidehara said that it must be made supplementary to the 
agreement. 

Dr. Koo said that the real value of such a declaration rested on 
the terms, and not necessarily on its being supplementary to the 
main agreement. 

Baron Shidehara said that the case in point was the supplementary 
declaration made by Japan in connection with the American- Japa- 
nese treaty of commerce. That declaration had been signed by 
Japan alone. It was not part of the treaty and had not gone for 
ratification. Still, that declaration concerning the Japanese emi- 
gration to America went with the said treaty. 

Dr. Koo said that the Chinese delegates agreed to draw up a 
declaration and, if desired, to attach it to the agreement. 

Baron Shidehara wondered if the wording of the proposed decla- 
ration might be shown to the Japanese delegates beforehand. 

Dr. Koo said that he hoped it was not Baron Shidehara's idea 
to name places to be opened. In making the choice of the cities and 
towns to be opened the Chinese Government would be guided by 
actual conditions in Shantung. 

Baron Shidehara said that he would not insist upon the inclusion 
in the declaration of the names of cities and towns to be opened, 
but he hoped that China would inform Japan what places were going 
to be opened. 

Dr. Koo said that the Chinese delegates were not able to give that 
information without consulting their Government. That would 
cause delay. The Japanese delegates apparently had in their mind 



244 

some suitable cities and toAvns. The Chinese delegates had a like 
idea. 

Baron Shidehara again asked whether the wording of the declara- 
tion the Chinese delegates AA'ere going to make could be shown to his 
delegation. 

Dr. Koo said that the Chinese delegates would draft something 
and send a copy, unofficially, to the Japanese delegation. 

Baron Shidehara signified assent. He added that he hoped it was 
not the intention or purpose of the Chinese Government to expel 
Japanese nationals actually living upon the railway. 

Dr. Koo asked if the point concerning the extent of the Tsingtao 
open port was to be taken up again. 

Baron Shidehara said that he hoped the Chinese delegates Avould 
be able to agree to the Japanese proposal. It was not disadvan- 
tageous at all to China to agree to having the entire leased territory 
opened to foreign trade. 

Dr. Koo said that in order to meet the Japanese viewpoint as far 
as possible the Chinese delegates did not wish to insist upon limiting 
the area to the Tsingtao side. They would agree to include the left- 
hand side of the bay as well, but in doing so he hoped that the Japa- 
nese Government would take some steps on their side to the end 
that the Japanese consular authorities Avould cooperate with the 
Chinese authorities in exercising special control over the Japanese 
who might desire to live in that part of the port. So long as that 
part remained undeveloped it would add to the anxiety of the Chi- 
nese authorities if any incidents should happen in that outlying 
district. It was not the Chinese idea in any way to throw special 
responsibility upon the Japanese consular authorities, but the Japa- 
nese consul would be better informed on the movements of his na- 
tionals. It was only asked that he should be good enough to exercise 
supervision on the movements of Japanese nationals who might 
desire to go there. General administrative authority as well as 
responsibility would, of course, remain in the hands of the Chinese 
authorities. 

Baron Shidehara said that the Japanese consul would be glad to do 
whatever lay in his power b}^ way of watching and supervising the 
movements of Japanese nationals on the other side of the ba3^ He 
wondered whether it was the intention of the Chinese delegates to 
have that engagement embodied in the proposed agreement on the 
Shantung question. 

Dr. Sze said that if that point was clearly set down in the minutes 
it would be sufficient. Some Japanese might choose to go to the 
other side to escape the vigilance of the authorities. They might set 
up such establishments as gambling houses and the like. Experience 
at other places indicated such a contingency. That was one of the 
principal reasons why the Chinese delegates had been proposing to 
limit the precincts of the open port to the right-hand side of the bay. 
He did not want to see the left-hand side turned into the home of 
undesirable establishments. 

Baron Shidehara said that the Japanese consul would surely see 
that the other side of the bay would not be made a base for either 
illegal or undesirable activities of Japanese nationals. 



245 

Dr. Koo said that as to the wording of the first sentence, the 
original Japanese wording had not been the final form of the agree- 
ment. It might be recast to read somewhat like this : 

" The Japanese Government hereby relinquishes its claim for the 
establishment of a Japanese exclusive settlement or of an inter- 
national settlement in Tsingtao. 

" The Chinese Government declares that the former leased terri- 
tory of Kiaochow will be opened to foreign trade in accordance with 
the established precedent of self-opened ports. In this port the 
nationals of treaty powers shall enjoy the same rights of trade and 
residence as are now enjoyed by them in self -opened ports of China." 

He (Dr. Koo) did not think his formula altered the sense of the 
original at all ; only it made the meaning clearer. 

Baron Shidehara said that he was not very well aware of the estab- 
lished precedents of the self -opened ports in China, but, considering 
the great number of foreigners already resident in the leased territory^ 
he desired to place importance on the point that China should insti- 
tute a special municipal system whereby the foreign community 
should be given a fair representation in the administration of Tsing- 
tao. The leased territory of Kiaochow was somewhat different from 
other self-opened ports in that respect. Before the opening of the 
port there actually were resident a great number of foreigners, and 
that quite legally. Therefore, in a concrete form, his (Baron Shide- 
hara's) proposal would be somewhat like this: 

'^ The Chinese Government declare that the entire area of the 
former leased territory of Kiaochow should be opened to foreign 
trade as a self-opened port, in which the foreign community shall be 
given a fair representation in the administration of the locality." 

Dr. Koo said that he saw Baron Shidehara's point of view, but he 
did not see in what way an arrangement could successfully be 
reached in the matter. While the question of establishing a satis- 
factory system of local government in China Avas now under study 
with a view to incorporating it in the general national constitution — 
that was, at least, the opinion prevailing in China — it would be very 
inadvisable to commit her to any definite system of local govern- 
ment in any part of China. He was not at all certain just what 
system would eventually be adopted in China. 

Baron Shidehara said that what he had in mind was this : China 
would eventually adopt a system — as in all countries in Europe and 
America, as well as Japan — ^^of opening the whole country for resi- 
dence and trade of foreigners. When that time came, of course, 
those foreign communities would merge into the Chinese local com- 
munities and form a part thereof. Until that time, however, it was 
hoped that a special municipal system, under which fair representa- 
tion would be given to the foreign community, would be instituted. 
That was not intended to be a permanent system; it was only to be a 
temporary arrangement pending the completion of the general 
Chinese municipal system. The peculiar municipal system now 
obtaining in Tientsin, Hankow, Shanghai, and other places would 
likewise eventually be merged into the Chinese municipal system 
when China opened the whole country to foreigners. The Chinese 
delegates would perhaps remember that the treaties between Japan 
and foreign powers abolishing the foreign settlements in Japan con- 



246 

tained provisions to the purpose that those settlements should merge 
in the <jeneral municipal system of Japan. 

Dr. Koo inquired whether foreign residents enjoyed franchise in 
Japan. 

Baron Shidehara replied in the negative. By the treaties con- 
cluded between Japan and the foreign countries in 1895-96 the for- 
eign settlements in Japan had been abolished. Those treaties con- 
tained special provisions about the matter. It was the Japanese 
subjects only who had voice in the local administration, the foreign 
powers having agreed to that arrangement in those treaties. 

Mr. Koo inquired whether no political franchise was enjoyed by 
the foreign residents. 

Baron Shidehara replied in the negative. 

Dr. Koo said that he saw the difficulty in the mind of Baron Shide- 
hara. In view, however, of the present political developments in 
China in respect of the local government, he doubted if a satisfac- 
tory formula could now be arrived at. So far as the administration 
of the public works, etc., the two delegations had already adopted a 
formula in which it was agreed that foreign residents in Tsingtao 
should be given fair representation in the management and main- 
tenance of such public works, etc. To his mind the point now raised 
had really been settled then. Were they to enter into the intricacies 
of the organization of the local government he was afraid that their 
discussions might be going astray. • Assurances having already been 
given with reference to the public works in Tsingtao muijicipality, 
he thought that the point raised by Baron Shidehara could very well 
be left aside at the present moment. 

Baron Shidehara pointed out that this was not the first instance in 
which foreigners were allowed fair representation in the administra- 
tion of a locality. If he was not mistaken a similar system obtained 
in Chefoo. 

Sir John Jordan said that he thought that was the case in Amoy. 

Dr. Koo remarked that there were, generally speaking, two classes 
of ports opened for the residence and trade of foreign nationals in 
China, namely, treaty ports and self-opened ports. In some of the 
treaty ports foreign powers had special rights of participating in the 
municipal administration. In the present case it had already been 
agreed that Tsingtao should be a self-opened port. The Japanese 
delegates had been good enough to relinquish the claim to estab- 
lish a Japanese or an international settlement. The natural conse- 
quence was that it should be turned into a self -opened port. The cir- 
cumstances of the port, however, being somewhat different from other 
self-opened ports, the Chinese delegates had agreed, on December 9, 
that in the maintenance and management of public works foreign 
communities should be given fair representation. Therefore, the 
substance of the Japanese wish had already been met. He thought 
that the matter which principally concerned the foreign residents con- 
sisted in the management of such public works as roads, parks, etc. 

Baron Shidehara remarked that, inasmuch as the Chinese delegates 
had already accepted the same principle in respect to public works, 
the acceptance of the present proposal of the Japanese delegates 
would merely be a little further extension of that principle. He did 
not see why serious objection should be interposed in adopting the 
same principle in the present connection. 



247 

Dr. Koo asked what phases of the local administration besides that 
of public works, such as roads, parks, etc.. Baron Shidehara had in 
vieAv. 

Baron Shidehara said that he understood the situation to be this : 
With regard to public properties the Chinese delegates had given 
assurance as to the foreign representation, but that referred only to 
the public works to be handed over to China by Japan. But there 
were no assurances as to the roads and sanitary institutions to be 
newly established. Those were the things which would affect the in- 
terests of the community greatly. 

Dr. Koo said that without committing himself he would say that 
since foreign representation would be made good in the management 
and maintenance of public works, the presence of the foreign repre- 
sentatives would very likely be taken advantage of by the Chinese au- 
thorities in laying out new roads and equipments. That would be a 
question only of practical prudence. 

Baron Shidehara said that he could not readily enumerate all in- 
stances, but there were many similar cases. For instance, if there 
occurred a prevalence of plague it would be found necessary to adopt 
certain measures to combat the epidemic. Sanitary arrangements on 
such an occasion would greatly affect the interests of the foreign 
community. 

Dr. Koo said that assurances had been given with reference to the 
sanitary equipments which Japan was going to hand over to China. 
He was afraid that Baron Shidehara was raising a political question 
upon which they were not free to enter. 

Baron Shidehara said that that was not his meaning. 

Dr. Koo said that the Japanese delegates had advanced three con- 
ditions and the Chinese delegates had met them all. The condition 
now advanced by Baron Shidehara had not been mentioned in the 
original proposition. 

Baron Shidehara replied that that was quite true, but in the last 
paragraph proposals were made in relation to the regulations, etc. 
That clause was intended to cover the present point at issue. 

Dr. Koo said that the Japanese delegates had just agreed to strike.. 
out that clause. 

Baron Shidehara said that, inasmuch as he had agreed to strike out 
that clause, it had become necessary that some such general clause in 
relation to the opening of the Tsingtao port should be inserted. It 
might be arranged that China should declare to open the leased ter- 
ritory of Kiaochow of her own accord and she would be ready to 
institute fair representation in the municipal administration. 

Dr. Koo hoped that Baron Shidehara would see the difficulty of 
the Chinese delegates. If they agreed to the Japanese suggestion 
they would be placed in the difficult position of justifying themselves 
in the face of the Root principle, not to mention any other reasons. 
He would desire the Japanese delegates to see that the essential point 
in the negotiation of any kind was for each side to repose confidence 
in the other. That was the only basis upon which progress could be 
made. While he appreciated the anxiety on the Japanese part in a 
question of this kind, the Chinese delegates could not on their part 
commit themselves for reasons already stated. But in saying this it 
was not the wish of the Chinese delegates to be understood as havino: 



248 

no desire at all to jiive adequate protection to foreigners at such an- 
important place as Tsingtao. 

Baron Sliidehara wondered if the difficulty could not be met by 
simply providing in the proposed agreement that the Chinese Gov- 
ernment should engage to open of its own accord the entire leased 
territory of Kiaochow as a port of trade and to permit the nationals 
of all foreign countries freely to reside and carry on commerce,, 
industry, and any other lawful pursuits within such territory, and 
that they further undertook to respect the vested rights of foreigners. 
He thought the clause might be left just in that way in the treaty, 
while it might be recorded in the minutes that there was an under- 
standing that it was the intention of the Chinese Government to 
formulate regulations for opening the port of Kiaochow, by which 
special system would be instituted in Kiaochow permitting the 
foreign community to have fair representation in the administra- 
tion of the locality. If, in the agreement were said " in accordance 
with established precedents of self-opened ports, etc.," there would 
be no room for giving consideration wdth regard to the desire of 
Japan as to the representation of the foreign community in matters 
mentioned by him before. 

Dr. Koo hoped that it was not the intention of the Japanese dele- 
gates to set up a form of international government on anj^ part of 
Chinese soil. At least on the Chinese part they hated greatly to take 
any step wdiich might expose themselves to the criticism that they 
were acting contrary to the principles just adopted by the conference. 

Baron Sliidehara said that the leased territory of Kiaochow was 
entirely different from other ports which had been opened by China 
of her own accord. Kiaochow had already been opened and for- 
eigners had actually resided and carried on trade and other pursuits. 

Dr. Koo said that those rights would be equally enjoyed by for- 
eigners under the Chinese administration as they were now^ Their 
interests Avould not be placed in jeopardy. 

Baron Sliidehara inquired what the established precedent of the 
self-opened ports might be. 

Dr. Koo stated, in reply, that he had mentioned Tsinanfu as an 
example. The administration rested entirely in the hands of the 
Chinese authorities, which precluded all possibility of foreign con- 
cessions or settlements being established in such a place. Since the 
Japanese delegates had agreed to relinquish the establishment of any 
settlement, Japanese or international, in Tsingtao, the only model 
to be followed w^ould be that of self-opened ports. 

Baron Sliidehara said that, considering the large number of for- 
eign residents in Tsingtao, the precedent of some of the self-opened 
ports might not give sufficient assurance to foreigners already resi- 
dent in Tsingtao. There w^ere no general regulations as to self- 
opened ports in China. They seemed to differ according to different 
places. It was difficult to say what w^as actually the established 
precedent. 

Dr. Koo said that if there were objections to the particular phrase, 
he would be ready to omit the w'ords " established precedent, etc.," 
but as to the proposition now advanced by Baron Shidehara he 
felt it difficult to enter into discussion in face of the Root principles, 
as w^ell as of various difficulties with which the Chinese delegates 
would have to be confronted. 



. 249 

Sir Johii Jordan said that he did not quite understand Dr. Koo's 
rmeaning. Therefore he desired to ask a question for his own 
enlightenment ; in practice hoAv Dr.' Koo proposed to arrange the 
matter: If fair representation was to be given to the foreign com- 
munity in relation to the public properties in Tsingtao, how could 
Dr. Koo consistently refuse foreign representation in the general 
administration? 

Sir John Jordan said that he did not quite understand Dr. 
Koo's meaning. Therefore he desired to ask a question for his own 
public works, while at Tsingtao this privilege had been pledged for 
the foreign community. So it would seem that Tsingtao was not 
going to be quite a self-opened port. He wondered through what 
body it was proposed that the foreign community in Tsingtao should 
participate in the management of the public works. 

Baron Shidehara said that the assurance pledged in regard to the 
public Avorks referred only to those which were going to be handed 
over to China. It did not include all public works in Tsingtao. 

Dr. Koo said that the laying out of new roads would in all prob- 
ability be regarded as part of the management of existing roads. 
The two things were so closely interrelated that there was nothing 
to prevent the foreign community from participating in the manage- 
ment of the new roads. If Baron Shidehara desired to raise the 
question of the organization of the municipal government, the Chi- 
nese delegates could not enter into that discussion and he was afraid 
that no fruitful conclusion would be reached. He said (speaking 
to Sir John Jordan) that the present agreement was not going to 
supersede the agreement of December 9. 

Sir John Jordan asked how, in practice, Dr. Koo proposed to 
coordinate the two things. 

Dr. Koo said that in the department of public works of the 
Tsingtao municipality there would be foreign experts. They would 
work with the Chinese authorities. It would be quite feasible to 
make the tAvo provisions operate together. 

Baron Shidehara said that it seemed to be the intention of the 
Chinese delegates to institute a municipal system different at least 
from that prevailing in Tsinanfu. 

Dr. Koo said that the Chinese idea was not to create any peculiar 
:system of municipality. 

Baron Shidehara said that a difficult point had been reached. If 
the Chinese delegates Avere not disposed to consider fair representa- 
tion for the foreign community in Tsingtao, Japan Avould have no 
assurance Avhatever. 

Dr. Koo said that she had one gi\^en on December 9. 

Baron Shidehara said that assurances had been gi\'en as far as 
the existing public works were concerned. He hoped that the Chines© 
delegates would not consider that Japan entertained any idea of 
interfering in the political situation in Tsingtao. It was purely a 
question of municipal matters. 

Dr. Koo said that he did not know whether he had made the 
Chinese position sufficiently clear. The Chinese delegates could 
hardly justify lending themselves to the creation of any exceptional 
system of municipal government, although, it was true, the condi- 
tions of the place to which that system was to be applied were some- 



250 

what different from other self-opened ports. They could not very 
well lend themselves to such a system at the very threshold of estab- 
lishing a new nation-wide municipal system in China. 

Baron Shidehara said that the Chinese delegates could very well 
explain to their people the wide difference between Tsingtao and 
other places. There were already a large number of foreigners in 
Tsingtao. That actual fact must be taken into account. China had 
formerly practically no part in the administration of Tsingtao. 
Now she was going to recover full right of sovereignty in that 
locality. Only in the matter of municipal government Japan de- 
sired fair representation for foreign nationals. He did not think 
that too much was being asked. 

Dr. Koo asked what sort of function was desired for the foreign 
country. 

Baron Shidehara said that the function regarded only munic- 
ipal matters. 

Dr. Koo said that the meaning of municipal matters would be 
very broad. 

Baron Shidehara said that they included such matters as the 
laying out of roads, the taking of sanitary measures in cases of 
epidemic diseases, etc. 

Dr. Koo asked what sort of responsibility the foreign body might 
owe to the Chinese Government; in what relation it might stand 
vis-a-vis the Chinese authorities. He Avondered if in case they did 
not discharge their duties properly they might be held to account- 
ability to the Chinese (Tovernment. He had grave doubts as to the 
feasibility of extending foreign representation to the municipal 
government. 

Baron Shidehara said that if the case of foreign settlements in. 
other parts of China were taken the matter seemed to be simple 
enough. He understood the system of foreign representation at 
Cliefoo was very simple. 

Sir John Jordan agreed with Baron Shidehara. 

Dr. Koo said that the foreign representation in the case of Chefoo 
was only voluntary. 

Sir John Jordan said that he understood that that was what 
Baron Shidehara had in mind in the case of Tsingtao. 

Baron Shidehara said that it w^as so. He had only municipal 
matters in his mind. He understood that in regard to Chefoo regu- 
lations had been made in 1909 for the organization of an interna- 
tional committee. Under those regulations Chinese and foreign, 
residents had organized a committee consisting of six foreign and 
six Chinese nationals. The committee had charge of all matters 
relating to roads, bridges, drainage, and sanitary matters. 

Dr. Sze said Chefoo was such a small port, but that Tsingtao 
was as large as Washington. 

Baron Shidehara suggested that the matter be considered over- 
night. 

Whereupon the meeting adjourned at 6 p. m. until 11 a. m.,, 
Friday, January 13, 1922. 

Washington, D. C, January 12^ 1922, 



251 

SJC-24.] 

January 12, 1922. 
[For the press.] 

Issued hy the Chinese and Ja^paanese delegations. 

The twenty-third and twenty-fourth meetings of the Chinese and 
Japanese delegates took place at 11 o'clock a. m. and 3 o'clock p. m., 
respectively, on January 12, 1922, in the governing board room of the 
Pan American Union Building. The questions of the extensions of 
the Shantung Railway, namely, the Kaomi-Hsuchow and Tsinaniu- 
Shunteh lines and of the Yentai-Weihsien Railwaj^, were discussed 
and an agreement was reached. 

Further, the question of the opening of the leased territor}^ of 
Kiaochow and of certain cities and towns in Shantung to interna- 
tional trade was taken up and progress was made. The discussion 
will be continued to-morrow. 

The meeting adjourned at 6.30 p. m. to meet at 11 a. m. Friday. 



TWENTY-FIFTH MEETING. 

The twenty-fifth meeting, held in governing board room, the Pan 
American Union Building, Washington, D. C., at 11 o'clock in the 
morning of Friday, January 13, 1922. 

PKESEaSTT. 

Chiim.—Dv. Sao-Ke Alfred Sze, Dr. V. K. Wellington Koo, Dr. 
Chung Hui Wang. Secretaries : Mr. Hawkling Yen, Mr. T. C. Yen, 
Mr. T. F. Hsu, Mr. C. H. Zee, Mr. Chuan Chao, Mr. T. H. Koo. 

Japan. — Baron K. Shidehara, Mr. M. Hanihara, Mr. K. Debuchi, 
Secretaries: Mr. S. Saburi, Mr. E. Kimura, Mr. H. Saito, Mr. T. 
Shiratori. 

Also present as observers : 

The United States of America. — Mr. John Van. A. MacMurray, 
Mr. Edward Bell. 

The British Empire. — The Right Hon. Sir John Jordan, G. C. I. E.. 
K. C. B., G. C. M. G. ; Mr. M. W. Lampson, M. V. O. 

OPENING OF THE PORT OF TSINGTAO. 

Dr. Sze said that the discussion at the last meeting had been on 
the subject of letting foriegn residents of Tsingtao participate in 
municipal matters, such as those concerning sanitary institutions, 
roads, etc. As it was considered desirable to allow such participation 
to the local foreign residents, so long as the extraterritorial rights of 
foreign nationals still existed in China, the Chinese delegates' had 
drawn up a new formula, which would give clear expression on that 
point. They felt positive that it would meet with approval, since it 
consisted of such generous terms. He would therefore invite Dr. 
Koo. the author of the draft, to read it to the Japanese delegates. 

Dr. Koo said that his draft read as follows : 

" The Chinese delegation will make a recommendation to the Chi- 
nese Government that, pending the enactment of general laws regu- 



latin^ the system of local self-o;overnment in China, the Chinese 
authorities in Tsingtao be instructed to ascertain the views of the 
foreign residents thereof in such municipal matters as may directly 
aifect their welfare and interests ; namely, the levy of taxes for local 
purposes, adoption of sanitary measures, and appropriations of lands 
for the building of municipal rights." 

Baron Shidehara said that, according to Dr. Koo's draft, the in- 
tention of the Chinese delegates appeared to be that a recommenda- 
tion should be made to the Chinese (jovernment. He wondered 
whether the Chinese delegation were going to ascertain if the formula 
would be acceptable to the Peking Government. Would the Japa- 
nese delegates be informed of the views of the Peking Government 
before an agreement was signed in relation to the whole Shantung 
question? 

Dr. Koo said that if it was Baron Shidehara's wish to have that 
point ascertained, the Chinese delegates would be prepared to com- 
municate with Peking to that end, although their original idea had 
been just to have the matter recorded in the minutes. 

Baron Shidehara said that in any case he and his colleagues would 
desire to ascertain if the recommendation would be acceptable to the 
Chinese Government. He added that he had. on his part, prepared 
a draft someAvhat on a similar line as the one just suggested. His 
draft read as follows : 

'' It is understood that in the regulations to be formulated by the 
Chinese Government concerning the opening of Kiaochow as a port 
of foreign trade, appropriate provisions will be made for permitting 
foreign communities to have a fair representation in the deliberation 
of municipal matters in that area, more especially with regard to 
roads, waterworks, sewage works, and sanitary measures." 

Dr. Sze said that the Chinese draft was more liberal, including, as 
it did, the levying of local taxes. He wondered whether Baron 
Shidehara desired to have that deleted. 

Baron Shidehara said that his draft was not enumerative. It 
merely gave more important matters for which the representation of 
the foreign community was desired. 

Dr. Koo said that the two drafts practically amounted to the same 
thing. In his own draft he had purposely avoided the word " repre- 
sentation " because the form of municipal government had not been 
decided upon, and as the word implied some sort of local election 
and exercise of franchise. On the other hand, China was prepared, 
if more acceptable to the Japanese delegates, to insert the words 
" w^aterworks and sewage works." 

Baron Shidehara said that he understood that, in regard to the 
existing public works, the Chinese delegates had expressed their 
readiness to agree that a fair representation should be given to the 
foreign communities. 

Dr. Koo replied that that was the case in regard to the public 
properties to be handed over by Japan to China. 

Baron Shidehara said that he had meant, for instance, roads, parks, 
sanitary equipment, etc. 

Dr. Koo said that the question referred to the management and 
maintenance of those public properties. It would fully answer the 
purpose if foreign assistance and participation were to be invited 



253 

in the management without the idea of franchise being implied in 
any way. 

Baron Shidehara asked if the present question was not also one of 
the management of those municipal matters. He could not really 
see what difference there could be between the two. As to the exist- 
ing works, the Chinese delegates had agreed to the principle of for- 
eign representation. He wondered why the Chinese delegates could 
not now agree to similar arrangement in regard to future plans in 
relation to those municipal matters. 

Dr. Koo thought that there was a great difference in the subject 
matter of the present formulae and that about which an agreement 
had already been reached. This involved a much wider scope of 
action. The making of plans must be different from the execution 
of plans already determined. Again, there was another obvious 
difference between his draft and that of Baron Shidehara; namely, 
in regard to the mention of the levying of local taxes. 

Baron Shidehara said that they would naturally be included in 
the words " municipal matters." He wondered what was practically 
meant by Dr. Koo's formula. Suppose there were three or four dif- 
ferent foreign communities in the locality and each community 
differed from others, in their opinion, how did the Chinese dele- 
gates propose to overcome the difficulties. 

Dr. Koo hesitated to express his opinion, because that was a matter 
of detail. 

Baron Shidehara said that the question would practically arise. 
He thought that in such eventuality the only way would be to call in 
the representatives of foreign communities and to let them meet the 
Chinese authorities. In his draft he had used the Avord " delibera- 
tions." He had intended that word to convey the idea that foreigners 
were to exercise no executive function. They would simply take part 
in the deliberations, forming a part of deliberative bodies, but with- 
out having any executive authority. 

Dr. Koo said that the process of ascertaining the views of the for- 
eign community might take the form of a conference. His idea was 
not to preclude any particular method from being availed of ; only 
he did not deside to limit the method of ascertaining the views of the 
foreign community. Therefore he preferred the general phraseo- 
logy- 

Baron Shidehara wondered whether it was Dr. Koo's idea practi- 
cally to propose to ascertain the views of the nationals of various 
countries through their respective consuls. . 

Dr. Koo said he had in mind no particular method. He desired to 
leave some latitude to the judgment of the local authorities, who 
would work out for themselves the most practical and acceptable 
method for the purpose. 

Baron Shidehara said that he would like to point out another fea- 
ture of Dr. Koo's draft. He had inserted the phrase " pending the 
enactment of general laws regulating the system of local self-govern- 
ment in China." Were such laws to be enacted to-morrow, was it 
Dr. Koo's idea that the proposed understanding would cease to be 
effective immediately? 

Dr. Koo said that his idea was not to leave the impression that a 
particular form of foreign representation was to be perpetuated. He 

93042—22 17 



254 

desired that there should be some time limit to the proposed under- 
standino- in order to prevent anj^ misapprehension that in the formu- 
lation of a general law concerning local government China might 
have her hands tied in respect of this particular part of Chinese 
soil. Academically Baron Shidehara's surmise was correct, but, at 
the same time, it was rather much too pessimistic. 

Baron Shidehara thought that a more logical way would be to say 
" pending the abolition of the extraterritorial regime in China." 

Dr. Koo said that he was sure that the provisions here did not at all 
flow from the system of extraterritorial rights. They were two dif- 
ferent matters. 

Baron Shidehara remarked that if the extraterritorial regime were 
abolislied, foreigners would be permitted to reside anywhere in 
China. There would no longer be such a special system as that of 
open ports. 

Dr. Koo said that even under the present system of extraterri- 
toriality foreigners did not enjoy the privilege of being consulted in 
regard to municipal matters, save only in a few foreign settlements 
and in a certain number of open ports. 

Baron Shidehara said that Tsingtao w^as an example of an open 
port in the interior of China. 

Dr. Koo said that he was not sure. It was a self-opened port. 
That was his understanding. 

Baron Shidehara said that if the words " pending the enactment 
of general laws regulating the system of local self-government in 
China " Avere adopted, that would not be sufficient because that enact- 
ment would be a unilateral act of China. There would be no assur- 
ance at all for the foreign community. 

Dr. Koo said that without wishing to go into the details of the 
proposed understanding, he would suggest using the words " through- 
out China.'' which might appease the anxiety in the mind of Baron 
Shidehara. It would take a long time for China to complete the en- 
actment of such a general law. Certainly in any case China would 
not enact laws which could not be put into effect. 

Baron Shidehara said that he did not know if he had made his 
meaning sufficiently clear to Dr. Koo. He would like to point out 
that even if China enacted laws regulating the local self-government, 
so long as the system of extraterritoriality continued to exist, China 
would certainly have difficulty in the levying of taxes without the 
cooperation of foreign communities. 

Dr. Koo said that the two things went together; he meant right 
and obligation. If the foreign residents in Tsingtao desifed to be 
consulted in such municipal matters as had been described, the ex- 
penses to be defrayed by the municipality should, in fairness, be 
apportioned among those residents also. 

Baron Shidehara said that he was not discussing a question of 
principle but really a question of practice. If certain foreigners re- 
fused to pay taxes, there would be no means of enforcing the pay- 
ment without the cooperation of foreign Governments so long as the 
system of extraterritoriality remained in force. 

Dr. Koo said that so long as the foreign Governments asked for 
privileges, they should also have to see that their nationals dis- 
charged their obligations. 



255 

Baron Shidehara said that the abolition of the present system 
should not be made dependent upon the enactment of general laws. 

Dr. Koo said that the purpose of his phraseology was that no ex- 
ceptional form of municipal government should be allowed to per- 
petuate itself in any part of China when she was trying to formulate 
a general S3-stem of local government applicable to the whole coun- 
try. He was sure that the Japanese delegates would see the reason- 
ableness of his position. 

Baron Shidehara asked whether it was the intention of the Chinese 
delegates to reserve the right to abrogate the understanding by the 
simple act of enactment of general laws. 

Dr. Koo said that that was not exactly the position taken by the 
Chinese delegation. China was not going to enact general laws in 
order to cancel the special system at Tsingtao. 

Baron Shidehara said that that point he had understood, but he 
could not quite perceive why the mere act of enactment should repeal 
the proposed arrangement as it appeared to be the Chinese idea. He 
then proposed a new plan, and desired to know how that struck 
the Chinese delegates : 

" It is understood, pending further arrangement to the contrary, 
that in the administration of the port of Tsingtao the Chinese local 
authorities will ascertain the views of the foreign residents therein 
in such municipal matters as may directly affect their welfare and 
interests." 

Dr. Koo desired to arrive at some compromise. However, he still 
found in this new draft of Baron Shidehara's that the difficulties 
which stood in their way had not been surmounted. The phrase 
" pending further arrangements to the contrary " implied that while 
China desired the general system of local self-government to be ap- 
plied in various parts of the country, she would not be free to do so 
unless arrangements were made with foreign powers. To his mind 
the question involved a political aspect on which he and his col- 
leagues did not feel justified in committing their Government. If, 
however, the Japanese delegates felt apprehensive that China might 
make this agreement to-day and enact the general law to-morrow to 
the end that the agreement should be canceled, he would suggest the 
addition of two words to the Chinese draft. That insertion would 
give an assurance that there existed no such danger. After the word 
" enactment " he would put in " and application." As regarded the 
attitude of the Chinese Government toward the recommendation the 
Chinese delegates were to make, the Chinese delegates were prepared 
to comply with the Japanese desire and to communicate at once with 
their Government, so that a reply could be had before the final stage 
of their agreement was reached. 

Baron Shidehara said that even if the word " application " were to 
be inserted, the same difficulty existed. It would be a unilateral act 
on the part of the Chinese Government only. 

Dr. Koo felt certain that Baron Shidehara did not want to give 
the impression that he desired China to consult Japan in the enact- 
ment of the general laws In China. 

Baron Shidehara said that in order to meet the Chinese wishes, 
he would like to propose another draft in which he tried to folloM' 
the Chinese draft as closelj^ as possible : 



256 

"It is understood that, pending the enactment and application of 
general laws regulating the system of local self-government in all 
parts of China, the Chinese authorities in KiaochoAv will ascertain 
the views of the foreign residents therein in such municipal mat- 
ters as will directly affect their welfare and interests. 

The words " foreign community " or " communities " were sug- 
gested to take the place of " foreign residents therein." 

Dr. Koo said that the word " community " was not desirable, be- 
cause that suggested that there was some organized body of foreign 
residents in Tsingtao. That was not the actual situation. He also 
objected to the phrase " all parts of China." He felt sure that Baron 
Shidehara did not mean that Tsingtao should be the last place 
where the general law should be applied, but only that the law 
should be generally applied in China. 

Baron Shidehara said that if just "China" were mentioned there 
might occur a case where the law was general but was applicable 
to certain specified regions. 

Dr. Koo said that to meet Baron Shidehara's point of view, he 
would propose to add the word " general " before " application." He 
would make that suggestion because there were in the body politic of 
China factions, such as Chahalu and Jehol, which stood on a different 
and peculiar basis. Unique conditions still prevailed in those dis- 
tricts. Therefore he would use the words " general application," 
which would mean practically the same thing without tying the 
hands of the Chinese Government in respect of such special districts. 

Baron Shidehara agreed to use that phraseology. 

Dr. Koo noticed that Baron Shidehara desired to substitute " Kiao- 
chow " for " Tsingtao." Kiaochow^fu was outside the leased terri- 
tory and there was a Chinese prefect there. What was meant in the 
Chinese draft was the seat of administration, which was in Tsing- 
tao. The idea was not to limit the area of administration. 

Baron Shidehara said that foreign nationals resided in the whole 
extent of the leased territory. He therefore suggested to make it 
" foreign residents in the port of Kiaochow." 

Dr. Koo inquired whether it was in the mind of Baron Shidehara 
that the residents in the whole area of the former leased territory 
of Kiaochow should be included. 

Baron Shidehara answered in the affirmative. Then he suggested 
that the latter part of the draft reading — " namely, the levy of taxes, 
etc.," should be deleted. He felt that it was not necessary to enu- 
merate all those matters. 

Dr. Koo said that the enumeration would have the advantage of 
excluding any difference of opinion as to what were included under 
the category and what not. As he had stated, if it was the Japanese 
wish, he had no objection to adding waterworks and sewage works 
to the list. What was in his mind was that the cooperation should 
work smoothly, eliminating the causes of disputes in future. 

Baron Shidehara said that if enumeration was made, the result 
would be that certain municipal matters affecting the interests of 
foreign communities might be omitted by inference. 

Dr. Koo said that some enumeration would be necessary in order 
to indicate the nature of the municipal matters. However, in order 
to meet Baron Shidehara's wishes, he would substitute " as " for 
" namely," so that it would be made clear that there were other 



257 

objects, beside the three mentioned in the Chinese formula, to be in- 
cluded in the category. 

Baron Shidehara suggested that the word " including " might be 
used, if it was Dr. Koo's idea to enumerate them as examples. 

Dr. Koo accepted. 

The two delegations agreed that the phraseology " The Chinese 
local authorities will ascertain the views of the foreign residents in 
the former Gertnan leased territory of Kiaochow " would take the 
place of " the Chinese authorities in Kiaochow will ascertain the 
views of the foreign residents thereof." 

Dr. Koo wondered whether Baron Shidehara desired to add water- 
works and sewage works to the list. 

Baron Shidehara suggested the phrase " and the construction and 
maintenance of municipal roads, waterworks, and sewage works." 

Dr. Koo accepted. 

Baron Shidehara remarked that, in regard to the levy of taxes 
of foreign nationals, it was understood that it should naturally be 
subject to the consent of the respective foreign Governments. The 
foreign residents themselves could not give any consent. 

Dr. Sze wondered whether in that case Baron Shidehara was not 
very keen about the improvement of the city. 

Baron Shidehara said that was naturally his desire, and foreign 
Governments would, of course, give their consent. 

Dr. Sze said that, if the Chinese authorities were to ascertain the < 
views of foreign Governments in that respect, the levy of taxes could 
only be effected subject to the consent of 19 or 20 Governments. 
More latitude of action should be given the municipality of Tsingtao. 

Baron Shidehara said that the residents had treaty rights. 

Dr. Koo said that the treaties did not give the residents the righ* 
to be consulted in municipal matters. 

Baron Shidehara said that the consent of various Governments 
was required, otherwise he wondered how the Chinese authorities 
could enforce the collection of taxes so long as the system of extra- 
territoriality lasted. 

Dr. Sze observed that if that was the case the result would be 
that the budget of the Tsingtao government would have to be ap- 
proved by the twenty-odd Governments. 

Baron Shidehara said that it was not the question of budget but 
of taxes. 

Dr. Koo said the taxes formed the important part of the budget. 

Baron Shidehara said that the eventuality would be inevitable so 
long as the system of extraterritoriality continued in force. 

Dr. Sze wondered whether foreigners had the privilege of par- 
ticipating in municipal government at foreign settlements; for* 
instance, at Shanghai. 

Sir John Jordan said that was certainly the case. Such practice 
obtained everywhere in China. 

Dr. Koo wondered whether foreigners had any voice in regard to 
the local taxation. 

Sir John Jordan said that was the case in regard not only to the 
municipal taxes but also to national taxes, such as stamp taxes. It 
was much more so with municipal taxes. 

Dr. Sze wondered how the local government could raise its revenue. 



258 

Sir John Jordan said that that could be arranged through a 
friendly understanding between the Chinese Government and the 
various foreign Governments concerned. That was the case in Han- 
kow also. 

Mr. MacMurray desired to make the following statement: 

" In regard to the reference to the levy of taxes, I feel bound to 
say that the presence of Mr. Bell and myself as observers at these 
conversations is not to be taken as implying a:i^ent to the principle 
that American citizens and their interests are subject to taxation 
for municipal purposes unless by the express consent of the Ameri- 
can Government. I am not prepared to indicate whether or not such 
consent will be given : I wish only to reserve to my Government 
entire freedom of action in judging of this question." 

Dr. Koo said that that was a matter between foreign nationals 
and the Chinese Government. He took it that those foreign nationals 
would always follo\^ the views of their respective Governments 
There Avas, further, no reason for the Governments to forbid the 
residents of Tsingtao to pay taxes. 

Sir John Jordan said that a very great question was involved in 
the matter. Formerly, under the German regime, the municipality 
utilized the 20 per cent contribution out of the customs revenue. It 
would not be fair if the foreign residents in Tsingtao were now to 
be imposed with heavy taxation without the consent of their Govern- 
ments. At least so far as the British subjects were concerned, they 
should not be burdened with taxes except under the general practice 
which now obtained throughout China. 

Baron Shidehara said that if the question of levying of taxes 
involved such a legal question, he would suggest that the passage at 
the end of the draft reading, "Namely, the levy of taxes, etc.," 
should be suppressed altogether. 

Dr. Koo said that the claim for the request for consent of various 
Governments was a big question for China, involving a matter of 
more or less political character. 

Baron Shidehara remarked that the question concerned various 
Governments, the matter being of general application to the various 
Governments. Japan was, therefore, not in a position to commit 
herself without consulting other powers concerned. Therefore the 
only way would be to delete the last part of the proposed formula. 

Dr. Sze remarked that that was a case of representation without 
taxation. 

Baron Shidehara said that the situation was now clear. Japan 
was not in a position to agree to the Chinese wish without consulta- 
tion with other Governments. Therefore there were two alterna- 
tives : First, to strike out the whole concluding phrase ; and, secondly, 
to strike out the words " the levy of taxes for local purposes," since 
the Chinese delegates desired to make some enumeration. 

Dr. Sze said that if they were to delete the whole concluding pas- 
sage there was a danger that unreasonable claims might be advanced. 
The foreign residents might say that a slaughterhouse concerned their 
welfare and interests. 

Baron Shidehara said that that was a matter of common sense. 

Dr. Koo said that he need hardly say that he felt quite grateful to 
the observers for their good remarks by way of facilitating the 
progress of the conversations, and as a token of his appreciation he 



259 

would agree to drop the last part of the draft, but on the understand- 
ing that neither Sir John nor Mr, MacMurray had indicated that 
their respective Governments would refuse to give their consent. 

Sir John Jordan and Mr. MacMurray replied in the negative. 

Baron Shidehara asked whether it was the intention of the Chinese 
delegation to recommend the above formula to the Chinese Gov- 
ernment. 

Dr. Koo said that if it was the desire of the Japanese delegates 
to hear the definite reply of the Chinese Government he would gladly 
refer the matter to Peking. 

Baron Shidehara said that if the~ formula was going to be accepted 
as it was he would not ask the Chinese delegation to communicate it 
to their Government. 

Dr. Koo said that the understanding was not intended to be a 
clause of the proposed agreement, but a declaration on the part of the 
Chinese Government. Therefore he would prefer the words " The 
Chinese Government declares " in lieu of " It is understood " at the 
beginning of the formula. 

The final form agreed upon read as follows : 

"The Chinese Government declares that, pending the enactment 
and the general application of the general laws regulating the sys- 
tem of local self-government in China, the Chinese local authorities 
will ascertain the views of the foreign residents in the former Ger- 
man leased territory of Kiaochow in such municipal matters as may 
directly affect their welfare and interests." 

Baron Shidehara then remarked that the main clause governing 
the whole subject matter had not yet been touched. He suggested 
the adoption of the following formula : 

" The Japanese Government declares that it has no intention of 
seeking the establishment of an exclusive Japanese settlement or of 
an international settlement in Tsingtao. 

" The Chinese Government, on its part^ declares that the entire area 
of the former German leased territory of Kiaochow will be opened 
to foreign trade; and that foreigners will be permitted freely to 
reside and to carry on commerce, industry, and other lawful pursuits 
within such area ; and, further, that the vested rights of all foreign- 
ers will be respected." 

Dr. Koo observed that the question regarding the vested rights had 
previously (on Dec. 9) been decided upon. He would therefore sug- 
gest using the formula adopted at that time if it was Baron Shide- 
hara's idea to incorporate the provision in the present agreement. 

Baron Shidehara agreed. 

The final agreement read as follows : 

" The Japanese Government declares that it has no intention of 
seeking the establishment of an exclusive Japanese settlement or of 
an international settlement in Tsingtao. 

" The Chinese Government, on its part, declares that the entire area 
of the former German leased territory of Kiaochow will be opened 
to foreign trade ; and that foreigners will be permitted freely to re- 
side and to carry on commerce, industry, and other lawful pursuits 
within such area. 

" The vested rights lawfully and equitably acquired by foreign 
nationals in the said area under the German regime, or during the 



260 

Japanese military occupation, will be respected. The questions re- 
lating to the status and validity of such vested rights shall be ar- 
ranged by a Sino-Japanese commission. 

" The Chinese Government declares that, pending the enactment 
and the general application of the general laws regulating the sys- 
tem of local self-government in China, the Chinese local authorities 
will ascertain the views of the foreign residents in the former Ger- 
man leased territory of Kiaochow in such municipal matters as may 
directly affect their welfare and interests." 

SJC-25.] 

Annex I. 

December 13, 1922. 
[For the press.] 

Issued hy the Chinese and Japanese delegations. 

The twenty-fifth meeting of the Chinese and Japanese delegates 
was held at 11 o'clock a. m. in the governing board room of the Pan 
American Union Building, and the discussion on the opening of the 
former German leased territory fo Kiaochow to foreign trade was 
discussed, and an agreement was reached. 

The meeting adjourned at 1.30 o'clock to meet at 10.30 o'clock 
Saturday morning, January 14. 



TWENTY-SIXTH MEETING. 

The twenty-sixth meeting, held in governing board room, the Pan 
American Union Building, Washington, D. C, at 10.30 o'clock in the 
morning of Saturday, January 14, 1922. 

PRESENT. 

China. — Dr. Sao-Ke Alfred Sze, Dr. V. K. Wellington Koo, Dr. 
Chung Hui Wang. Secretaries : Mr. Hawkling Yen, Mr. T. C. Yen, 
Mr. C. H. Zee, Mr. Chuan Chao, Mr. T. H. Koo. 

Japan. — Baron K. Shidehara, Mr. M. Hanihara, Mr. K. Debuchi. 
Secretaries: Mr. S. Saburi, Mr. E. Kimura, Mr. H. Saito, Mr. T. 
Shiratori. 

Also present as observers : 

The United States of America. — Mr. John Van A. MacMurray, Mr. 
Edward Bell. 

TJie British Empire. — The Right Hon. Sir John Jordan, G. C. I. E., 
K. C. B., G. C. M. G. ; Mr. M. W. Lampson, M. V. O. 

VESTED RIGHTS. 

Baron Shidehara said that before entering into the discussion of 
other matters he would like to allude to a minor point which had 
escaped his attention in the draft adopted the day before in rela- 
tion to the vested rights. The Chinese delegates would remember that 
in the first part of the agreement on that question the phrase " vested 
rights of foreign nationals " had been adopted, but in the latter part 



261 

there was a provision that the Sino-Japanese Commission would 
arrange all questions relating to the status or validity of such vested 
rights. However, to his mind, the commission should take up only 
the questions relating to the vested rights acquired by Japanese na- 
tionals exclusively. 

Dr. Koo said that was a question of interpretation. As a matter of 
fact, that joint commission would not take up the question of rights 
acquired by a third party. 

Baron Shidehara suggested the addition of the words " of Jap- 
anese nationals " so that the meaning would be clear. 

Dr. Koo agreed. He then pointed out that there was a small mis- 
take in the agreement as adopted yesterday. The word " and " be- 
tween " status " and " validity " should read " or," as that was the 
phraseology adopted on December 9. 

Baron Shidehara agreed. 

It was further agreed that the last paragraph of the agreement, 
running " The Chinese Government declares that, pending the enact- 
ment," etc., should form an annex of the treaty to be concluded at 
the end of the present conversations. 

The agreement therefore read as follows: 

" The Japanese Government declares that it has no intention of 
seeking the establishment of an exclusive Japanese settlement or of 
an international settlement in Tsingtao. 

"The Chinese Government on its part declares that the entire 
area of the former German leased territory of Kiaochow will be 
opened to foreign trade, and that foreigners will be permitted freely 
to reside and to carry on commerce, industry, and other lawful pur- 
suits within such area. 

" The vested rights lawfully and equitably acquired by foreign 
nationals in the said area under the German regime, or during the 
Japanese military occupation, will be respected. The questions re- 
lating to the status or validity of such vested rights of Japanese 
nationals shall be arranged by a Sino-Japanese commission. 

Annex. 

" The Chinese Government declares that, pending the enactment 
and the general application of the general laws regulating the sys- 
tem of local self-government in China, the Chinese local authorities 
will ascertain the views of the foreign residents in the former Ger- 
man leased territory of Kiaochow in such municipal matters as may 
directly affect their welfare and interests." 

THE RESTITUTION OF THE LEASEHOLD OF KIAOCHOW. 

Dr. Sze desired that Baron Shidehara would elucidate to the Chi- 
nese delegates the Japanese position in relation to the question of 
the restitution of the leasehold of Kiaochow to China which formed 
the subject of paragraph 1 of the Japanese note of September 9, 1921. 

Baron Shidehara said that the article was intended to provide 
that the former German leased territory of Kiaochow should be 
restored to China, and also that the rights formerly granted to 
Germany within the so-called neutral zone should be canceled. 



262 

Dr. Sze supposed that under that chiuse Japan would hand over 
to China those documents nnd deeds which Japan had received from 
Germany after the conclusion of peace in Europe. 

Baron Shidehara asked whether Dr. Sze meant to refer to the 
deeds for public land held by the German Government. 

Dr. Sze said that what he meant was not only the title deeds of 
land, but all other sorts of documents. He meant all deeds, archives, 
registers, plans, etc., which Japan had received from Germany. 

Baron Shidehara said that he had just been informed by Mr. De- 
buchi that Avhen the Germans were withdrawing from Tsingtao they 
had burned all documents, and only copies of various documents had 
been handed over to Japan in Berlin. 

Dr. Sze said that it would be of great assistance to the Chinese 
authorities in their administration of Tsingtao if they could obtain 
the complete archives, registers, etc., in case disputes should arise 
in the future. Those papers would not be of much use to. Japan, 
but would be of great importance to China. 

Baron Shidehara thought that the Japanese authorities would be 
quite willing to hand over such maps, plans, registers, title deeds, 
etc., as might be necessary for effecting the transfer of public prop- 
erties to China. 

Dr. Sze said that what he had in mind was such documents as 
Japan had received under article 158 of the treaty of Versailles, not 
necessarily only those connected with public properties. It was 
possible that there might in future be lawsuits and disputes, and it 
might become necessary to refer to old archives, therefore he thought 
it would be to the general interest that Chinese authorities should be 
in possession of all these documents. 

Baron Shidehara asked whether it would not be just the same to 
the Chinese Government if copies of those documents were handed 
over. 

Dr. Sze said that if the Japanese Government did not possess the 
originals, certified copies would do just the same. And also with 
reference to the archives during the Japanese administration, he had 
understood, from the present conversations with the Japanese dele- 
gates, that the Japanese military authorities had leased out part 
of the land which had been held as public property under the German 
regime. He desired that all documents relating to the Japanese 
administration of Tsingtao should be handed over. 

Baron Shidehara wondered whether Dr. Sze had meant all docu- 
ments concerning the Japanese administration in Tsingtao. 

Dr. Sze thought that the documents relating to the six years of 
Japanese administration might be of use in case question should 
arise in the future. 

Baron Shidehara said that the J apan authorities would be willing 
to hand over to the Chinese authorities either the originals or the 
copies of such documents as might be necessary for the Chinese 
authorities in taking over the administration of the territory. 

Dr. Sze said that he did not desire to appear insistent, but he 
would like to have not only documents necessary for taking over the 
administration, but also those necessary for the Chinese administra- 
tion at Tsingtao. 

Baron Shidehara said that he really did not know what documents 
there existed. As a matter of fact, however, he was sure that the 



263 

Japanese authorities would be ready to give up any document that 
would facilitate Chinese administration at Tsingtao. 

Dr. Koo said that he had just drafted the following formula on 
the point under discussion : 

" The Japanese Government agrees to hand over to the Chinese 
Government at the time of the restitution to China of the former 
leasehold of Kiaochow all the archives, registers, plans, title deeds, 
and other documents in the possession of Japan relating to the 
former leased territory of Kiaochow and to the administration there- 
of, both under the German regime and during the period of Japanese 
occupation, as well as to the surrounding 50-kilometer zone around 
Kiaochow Bay and to the rights originally granted to Germany in 
other parts of Shantung Province." 

-Baron Shidehara said that it seemed to him that the points raised 
were rather matters of detail. Whilst Japan was ready to hand 
over all those documents necessary in effecting the transfer of the 
territory to China, he Avould suggest that upon the coming into force 
of the agreement now under discussion the Chinese Government 
should send to Tsingtao a commission authorized to make arrange- 
ments with the Japanese authorities relating to the transfer of the 
administration of Tsingtao as well as of public properties used for 
administrative purposes. The Chinese commission in meeting the 
Japanese authorities would be able easily to arrange what documents 
should be handed over to China. 

Dr. Koo said that that was a question of execution but that it 
would be desirable to embody in the agreement now being discussed 
a provision on that point. 

Baron Shidehara said that just at that moment he did not know 
what documents relating to the leased territory were in the hands 
of Japanese authorities in Tsingtao or Tokyo. He could just give 
the Chinese delegates a general assurance that the documents neces- 
sary for effecting the transfer of the territory would be handed ■ 
over to China. 

Dr. Koo said that what the Chinese delegates had wanted was 
not only the documents necessary for effecting the transfer of the 
territory, but all other documents that might be needed in the carry- 
ing on of the administration. 

Baron Shidehara said that all documents necessary for effecting 
the transfer would be handed over. China was going to be respon- 
sible for the administration of Tsingtao after the transfer was 
effected. If Japan actually had any documents that might be of use 
to the Chinese authorities they would be handed over, but he could 
not here undertake that any specific kinds of documents would be 
handed over, because the Japanese authorities might not possess any 
documents at all of the specified description. 

Dr. Koo said that he saw Baron Shidehara's point of view. There- 
fore, he would now propose to add " in the possession of the Japanese 
Government." 

Baron Shidehara stated that the question under discussion was 
not that of a cession of territory. The treaty now under discussion, 
therefore, should not contain such a provision as would occur in a 
treaty of cession. 

Dr. Koo said that such had not at all been the intention of the 
Chinese delegates in proposing the insertion of the provision. Their 



264 

purpose was simply to facilitate the work of the administration to be 
set up at Tsingtao. 

Dr. Koo continued that, while waiting for his draft to be type- 
written, he would suggest the discussion of another matter in order 
to gain time. It related also to the restitution of the leasehold rights 
of Kiaochow and other rights connected therewith. He presumed 
that the two delegations had agreed on the principle that the restitu- 
tion should take place of all rights and privileges which had origi- 
nall}^ been granted to Germany, as well as those to Avhich Japan, 
might have laid claim during her administration, either within the 
leased territory and the neutral zone or in other parts of Shantung 
Province, subject, of course, to such arrangements as should be stipu- 
lated in the present agreement. He should be glad to hear the views 
of the Japanese delegation on that point, although he felt sure that 
they had agreed in principle. 

Baron Shidehara wondered what rights and privileges Dr. KoO' 
had in mind. 

Dr. Koo said that the rights granted to Germany by China were 
not confined within the limits of the leased territory and the neutral 
zone, but extended outside, such as in the case of the railways, mines, 
etc. These questions had not been settled yet. But as a general 
principle he had understood that it was the intention of the Japa- 
nese Government to restore all rights originally granted to Germany 
and those to which Japan had laid claim during her administration, 
subject only to such arrangement as should be stipulated in the agree- 
ment now being discussed. One point which he had in mind referred 
to the right of preference or option which had been granted to Ger- 
many with reference to the employment of experts, the supply of 
material, and capital. It was true that the Japanese delegates had 
already made a declaration about this option, but he noAv wanted 
to have a comprehensive clause on those points. 

Baron Shidehara said he cou4d not think of any other rights which 
had not been touched upon in the Japanese proposal. He believed 
that all rights which Germany had possessed in Shantung were 
covered by the Japanese proposal of adjustment. If there were 
any other rights they were rights of which the Japanese Govern- 
ment was not aware. 

Dr. Koo stated that in paragraph 8 of the Japanese note of Sep- 
tember 7, 1921, reference had been made to " other matters " which 
were yet to be adjusted. 

Baron Shidehara said that by the " other matters not mentioned " 
were meant such matters as those relating to the wireless stations at 
Tsingtao and Tsinanfu or to cables. The matter relating to post 
offices was also included, but that question had already been disposed 
of by the full committee on Pacific and Far Eastern Questions. 
Such matters had to be adjusted with the transfer of the administra- 
tion. 

Dr. Koo said that, with reference to the wireless stations which 
had been put up solely for the use of the troops in Tsinanfu and 
Tsingtao, they would naturally be taken off when those forces were 
withdrawn. They constituted merely a part of the Japanese mili- 
tary equipment. 



265 

Continuing, Dr. Koo said that, to put it in another way, he 
wondered whether it was not the Japanese intention that after the 
restitution was effected, Japan would retain only such rights and 
privileges as should be agreed upon and stipulated for in the present 
agreement. 

Baron Shidehara said that the Chinese delegates would remember 
that at Paris the Japanese peace delegates had made declarations 
to the effect that it was not political rights, but only economic privi- 
leges, which Japan desired to retain in the Province of Shantung. 
With reference to those economic privileges, the Japanese proposal 
had been intended to cover all matters that could be foreseen. He 
wondered whether the Chinese delegates could think of any matters 
left out. 

Dr. Koo stated that he had no particular rights or concessions in 
mind. He had simply asked that a provision should be made for a 
general and precise understanding that, when the restitution of Kiao- 
chow should have been carried out, the rights and privileges of 
Japan in the former German leased territory and other parts of 
Shantung would be only those that were clearly stipulated in the 
agreement, subject, of course, to the general engagements in force 
between China and Japan. After the restitution was effected, Japan 
would not have any territorial advantage or any preference or ex- 
clusive privilege, whether of political or economic character. 

Baron Shidehara said that those rights and privileges were those 
which China had granted to Germany. China ought therefore to 
know best. Japan did not know what other rights there existed, 
apart from those to be covered by the present agreement. 

Dr. Koo said that Baron Shidehara's views corresponded with his 
own. He did not know whether there existed any other rights or 
privileges except those covered by the conversation. Baron Shide- 
hara's understanding seemed to bear out his (Dr. Koo's) under- 
standing of the situation. 

Baron Shidehara inquired whether it was Dr. Koo's intention to 
hava the provision in the form of a treaty, or whether he simply 
desired to have it recorded in the minutes. 

Dr. Koo said that he had had no idea about the form. 

Baron Shidehara said that neither Dr. Koo nor himself was aware 
of any other rights than those touched upon in the Japanese pro- 
posal. If there were anything else, they would have to make an 
arrangement for it now. 

Dr. Koo said that a general understanding of that kind would be 
Tery useful. Some questions might arise later on which might imply 
claims involving some rights or privileges not covered here. In 
other words, they desired to have a general settlement so that it 
would be a permanent settlement. 

Baron Shidehara said that he did not see any necessity for making 
such a provision. Dr. Koo had said that he had no particular rights 
or privileges in mind. If neither of them knew of any other rights 
or privileges, it would be hardly necessary to make such general pro- 
A^ision in the treaty. 

Dr. Koo said that such provision would be reassuring and pro- 
mote public confidence and that, although the Chinese delegates had 
no idea as to the existence of other rights and privileges any more 



266 

than the Japanese delegates had, they would naturally like to have 
this point made clear that when the present restitution was com- 
pleted Japan would possess rights and privileges only subject to 
such arrangement as had been and might still be agreed upon be- 
tween the two delegations. 

Baron Shidehara said that it Avas true that the restitution should 
be complete, but, so far as the two delegations could see, they knew 
of no other rights than those already touched upon. Therefore he 
did not see the necessit}- for such general provision as had been pro- 
posed. He should, of course, be quite ready, if any concrete rights 
or privileges were in the mind of Dr. Koo, to give consideration to 
them. 

Dr. Koo said that that point should be reserved for the moment 
and the point raised at the beginning of the meeting should be now 
taken up, having reference to the draft which had just been type- 
Avritten. 

Baron Shidehara said that he had no objection to having an under- 
standing on that point recorded in the minutes in some such sense: 

" The Japanese Government agrees to hand over to the Chinese 
Government at the time of the restitution of the former German 
leased territory of Kiaochow such archives, registers, plans, title 
deeds, and other documents in the possession of Japan, or such certi- 
fied copies thereof, as may be necessary for the transfer to China of 
the administration of the said territory, as well as for the adminis- 
tration by China, after such transfer of said territory and of the 
50-kilometer zone around the Kiaochow Bay." 

He thought that his formula covered the whole point. 

Dr. Koo said that apparently Baron Shidehara's idea was to turn 
over to China only such documents as were necessary for the transfer 
and the carrying on of the administration at Tsingtao. 

Baron Shidehara answered in the affirmative. He thought that it 
was those documents that were wanted by China. It was clearly 
impossible that all such documents as Japan might have regarding 
military matters should be handed over. 

Dr. Ivoo said that he was not thinking of military archives ; those 
might form part of the historic record of Japan. He was afraid, 
however, that Baron Shidehara's wording was rather limited in 
scope in regard to the documents to be given up. It was possible 
that in the course of later administration of Tsingtao questions 
might arise calling for reference to old documents. 

Baron Shidehara said that it seemed to him that that point was 
covered in his formula by the phrase " after the transfer of the 
administration," etc. 

Dr. Koo suggested that perhaps military documents might be made 
an exception. 

Baron Shidehara said that there might be confidential documents 
which, while not necessary to China for purposes of administration 
at Tsingtao, might be needed by Japan. He supposed that China 
was not asking for those documents just to satisfy her curiosity. 

Dr. Koo said that that was not the case, but that human foresight 
was so limited that what was considered of immediate necessity 
might happen not to cover some future questions. He suggested a 
change of phraseology so as to contain all documents relating to the 
administration. 



267 

Baron Shidehara said that that was what was meant by his draft. 

Dr. Koo said that the only difficulty appeared to be that Japan 
would be the sole judge in this matter. Not possessing the documents 
herself, China might not be in a position to say what were necessary 
and what were not. 

Baron Shidehara said that the Chinese commissioners might very 
well ask the Japanese authorities whether the latter had not such and 
such documents in their possession. 

Dr. Koo said that the documents were not in the possession of the 
Chinese and they could not say what were necessary. 

Baron Shidehara said that Japan could not hand over all docu- 
ments. There might be some documents which would not be neces- 
sary to China. Again, Japan had to keep confidential documents. 

Dr. Koo repeated that military documents might be excepted. 

Baron Shiclehara said that what he had stated applied as well to 
documents on civil matters. 

Dr. Koo suggested adding at the end of his own draft the phrase 
" it being understood that documents of military or historic interest 
are not included therein." That was, he understood, what Japan 
desired to retain and which China did not want to have. 

Baron Shidehara said that if China had any doubt about the 
sincerity of the Japanese authorities, there would be no use making 
any provision at all. Even if the suggested modifications were to be 
adopted, the Japanese authorities might well say that such and 
such documents were of purely militant or historic interest. 

Dr. Koo said that it was not a question of confidence but merely 
one of classification. 

Baron Shidehara said that the wording of his draft formula 
practically covered what Dr. Koo had in mind. It appeared that 
the Chinese delegates were afraid that Japan might conceal docu- 
ments necessary for the administration of Tsingtao. After that 
administration had been transferred to China there was no reason 
whatever . for Japan to conceal such documents. The Japanese 
authorities would certainly hand over to China all documents which 
would be useful to her. If there were any confidential documents, 
they would not hand them over anyhow. 

Dr. Koo said that he didn't wish to insist upon his point any 
longer, but taking Baron Shidehara's draft as the basis, he suggested 
inserting the phrase " those that might be useful " after the phrase 
" as well as " so that the scope of documents to be handed over might 
be somewhat widened. 

Baron Shidehara consented. 

Dr. Koo said he would further propose to say " upon withdrawal 
from the former German leased territory of Kiaochow " instead of 
" at the time of the restitution," etc. 

Baron Shidehara said he preferred his original wording because 
that made the meaning clear. 

Dr. Koo said that his Idea was to make the phrase indicate the 
time. Moreover, further on in the formula there was a repetition 
of a similar phrase. 

Baron Shidehara agreed to change the same phrase so as to read 
" upon the transfer to China of the administration, etc." 

Dr. Koo said that he supposed it was understood that all the docu- 
ments Japan had acquired from Germany would be handed over to 



268 

China, while it would be left to Japan to sort out on the above prin- 
ciple from those documents which had reference to the Japanese 
administration of Tsingtao. 

Baron Shidehara said that was the meaning. He added that Mr. 
Debuchi had been at Berlin to take over the Tsingtao documents 
from Germany and that, so far as he (Mr, Debuchi) remembered, 
the documents handed over to Japan were only copies of the agree- 
ments and treaties signed at Peking between German representatives 
and the Chinese Government; and, moreover, there were no plans or 
title deeds of any kind. 

Dr. Koo asked how it was about the archives at Tsingtao — those 
which Japan had obtained direct. 

Baron Shidehara said that he presumed there had been documents 
found at Tsingtao; he understood most of the documents had been 
burnt and some were left in mutilated form. In withdrawing from 
Tsingtao, the Germans had tried to destroy all documents as far as 
possible, so that nothing of practical importance had been left there. 

Dr. Koo supposed that, such as they were, all the documents found 
at Tsingtao would be handed over to China. 

Baron Shidehara reminded Dr. Koo that the above understand- 
ing was to form part of the minutes and not part of the treaty. 

Dr. Koo wondered whether Baron Shidehara had any objection to 
making it an annex to the treaty. 

Baron Shidehara said that it did not look nice to have it attached 
to the treaty; as he had pointed out, the thing looked so much like 
a cession of territory. 

Dr. Koo agreed to have the understanding recorded in the minutes. 
The final formula read as follows : 

" The Japanese Government agrees to hand over to the Chinese 
Government upon the transfer to China of the administration of 
the former German leased territory of Kiaochow such archives, reg- 
isters, plans, title deeds, and other documents in the possession of 
Japan, or such certified copies thereof, as may be necessary for the 
said transfer, as well as those that may be useful for the adminis- 
tration by China, after such transfer of that territory and of the 
50-kilometer zone around the Kiaochow Bay." 

Continuing, Dr. Koo said that with reference to the other point 
discussed a while ago he had a rough draft made. 

" Japan agrees to withdraw from the former leased territory of 
Kiaochow^ and to transfer to China the administration thereof on 
the day of the coming into force of the present agreement. 

" It is understood that the Japanese Government and its nationals 
disavow all claims to any territorial advantages or preferential or 
exclusive rights, privileges, or concessions in respect of the Province 
of Shantung which constitute an impairment of Chinese sovereignty 
or which are inconsistent with the principle of equal opportunity 
for the commerce and industry of all nations, or to any (other) 
rights or privileges in respect of the former leased territory of 
Kiaochow and of other parts of Shantung other than those stipu- 
lated in the present agreement, or those which are enjoyed by other 
powers or their nationals." 

Continuing, Dr. Koo said that in elucidating the second para- 
graph of his draft he might say that the first part of that paragraph 
was substantially the same as the statement which was contained in 



269 

paragraph 4 of the Japanese note of September 7 and which Mr. 
Hanihara had redeclared at a previous meeting. The second part 
of the second paragraph referred to rights and privileges other 
than those stipulated in the present agreement. 

Baron Shidehara said that the second paragraph of Dr. Koo's 
formula appeared to imply that Japan should give assurance regard- 
ing Chinese sovereignty and the principle of equal opportunity only 
in respect of the Shantung Province, while those principles were of 
general application to all parts of China. 

Dr. Koo said that the Chinese delegates simply proposed that 
clause while the question of Shantung was being adjusted and the 
final agreement was going to be concluded on that question. 

Baron Shidehara said that such a clause might give an impression 
to those who read the agreement as if Japan was giving such an as- 
surance only in respect of the Province of Shantung. Why should 
Japan give assurances only in regard to Shantung while the prin- 
ciples in question applied to all parts of China ? 

Dr. Koo said that it was because the proposed agreement was 
dealing solely with the Shantung question. 

Baron Shidehara said that the matter of those principles had 
been disposed of by a general committee of the present conference. 
It seemed hardly necessary to repeat them here. The only point of 
practical importance to the two delegations in the whole subject 
matter was the rights and privileges referred to in article 4 of the 
Japanese note. The general question of the sovereignty of China 
and of equal opportunities might well be left to the application of the 
general resolution adopted by the conference. 

Dr. Koo said that a provision of the kind proposed by him would 
be useful because it would reassure public confidence and dissipate 
misgivings in view of the fact that so many complicated problems 
had happened respecting the Shantung question. It was proposed 
merely to reintroduce here the general principles adopted by the 
Far Eastern committee. 

Baron Shidehara said that at the same time such a provision might 
be taken as an admission on Japan's part that she had so far dis- 
regarded those principles in the Province of Shantung. 

Dr. Koo said that he didn't think such an impression would 
necessarily be given, but if it was feared that such an impression 
might be conveyed alterations might be made in the wording. 

Baron Shidehara said that he did not quite see any practical neces- 
sity for making such a stipulation. The matter might safely be 
left to the application of the principles adopted by the conference. 

Dr. Koo said that he felt there was practical accord of opinions 
in the matter. It was understood that after the proposed transfer 
of the leasehold, etc., was effected and the present agreement on Shan- 
tung concluded and put in force Japan would not claim any rights 
or privileges in respect either to the former German leased territory 
or to any part of the Shantung Province except such as were stipu- 
lated for in the present agreement or in general treaties. 

Baron Shidehara wondered how Japan could lay claim to such 
rights and privileges after the question of Shantung had been dis- 
posed of. The Germans had had those rights and privileges which 
were mentioned in article 4 of the Japanese note, but Japan was now 

93042—22 18 



270 

p:oing to renounce them all. What possible ground could there be 
for intimating that the Japanese Government might make such 
claims ? 

Dr. Koo sfiid that there was no assumption that Japan might do 
so. It was simply proposed to record the understanding of the two 
delegations. He understood that in substance the Japanese delegates 
entertained the same views in regard to the subject matter of his 
formula. He Avondered if his understanding was not correct. 

Baron Shidehara said that Japan certainly did not entertain any 
desire for territorial advantages, etc. But it was entirely another 
matter whether or not that understanding should be formulated in a 
treaty of this kind. It should never be intimated that Japan had 
been committing criminal acts in Shantung, 

Dr. Koo said that it was far from his intention; he was ready to 
alter his original wording if that was in any way to give such an 
unexpected impression. The whole clause " disavow, etc.," might be 
entirely omitted and merely the latter part of the second paragraph 
might be retained. The fact contained in the latter part was not 
disputed at all between the two delegations. 

Baron Shidehara said that he could not think this paragraph 
placed Japan in the proper light. The proposed change did not 
help much in that respect. The original wording purported to make 
Japan disavow her intentions to perform any criminal acts. The 
changed form seemed to say that Japan was not a criminal. 

Dr. Koo asked if Baron Shidehara really thought that such an 
impression would be conveyed. 

Baron Shidehara said that besides there were some points in Dr. 
Koo's draft which were not quite logical. The phrase " other than 
those stipulated, etc.," would seem to make it appear as if the present 
agreement contained stipulations which constituted an impairment 
of Chinese sovereignty or the principle of equal opportunity. 

Dr. Koo said that the word " other " in the phrase " or to any other 
rights or privileges " was there by mistake. 

Baron Shidehara said that he was not aware if there were any 
privileges to be stipulated for in favor of Japan in the proposed 
agreement. 

Dr. Koo said that it was not the question. 

Baron Shidehara said that Dr. Koo's wording, however, expressly 
stated so. 

Dr. Koo said that the first " other " was to be omitted. 

Baron Shidehara said that there were no privileges stipulated in 
the agreement. The opening of Kiaochow could hardly be called a 
privilege for J apan. He hoped the Chinese delegates would agree to 
leave the matter to the application of the general principles agreed 
upon in the conference. 

Dr. Koo asked if it was the position of the Japanese delegates that 
while in substance they had no objection at all to the understanding, 
the matter was so obvious that it was not necessary to insert it in the 
agreement. 

Baron Shidehara said that it was the Japanese position. 

Dr. Koo said that in that case he took it that the Japanese dele- 
gates would have no objection to having this recorded in the minutes 
as representing the understanding of the two delegations. He 
thought there would be no harm in telling the truth. 



271 

Baron Shidehara said that while it was so, people, in reading the 
minutes of the conversations, would naturally ask what necessity 
there was for the two Governments to make such a special under- 
standing. It was, of course, merely a statement of fact, but he did 
not like to have it recorded in any formal terms. 

Dr. Koo said that in that case the matter would be simply re- 
corded. 

Mr. Hanihara said that it was true there was no harm in stating 
the truth, but there were many truths and facts which were better 
not stated. Suppose he and Dr. Koo were to make a contract ; neither 
had any intention to break the pact ; that was the fact. But if that 
fact were to be stated it would be awkward. It was true that Japan 
had no intention to claim any territorial advantages, but if that 
fact were made the subject of a formal statement, Japan might be 
placed in an awkward position. It must not, of course, be supposed 
that Japan had any intention to encroach upon the sovereignty of 
China. 

Dr. Koo said that as to the breach of contract there generally were 
provisions attached, but that was neither here nor there ; only, Baron 
Shidehara had affirmed more than once the substance of the under- 
standing. 

Baron Shidehara said that if it was asked of him whether he had 
committed criminal acts or if he was a criminal, he would, of course, 
say no. When, however, such a negation was embodied in an 
official record it was an entirely different matter. 

Dr. Koo said that it was unfortunate that to his proposal should 
have been attributed an insinuation which had not really been in- 
tended. 

Baron Shidehara said that in any case the discussions on this 
matter would be contained in the minutes of the meeting ; that ought 
to be quite enough for the purpose Dr. Koo had in view. It was not 
necessary at all to agree to any specified terms of understanding. 

Dr. Koo said that seeing the two delegations were really as one in 
regard to the substance, he should not insist upon the form, because 
after all substance counted more than form, so he would agree to 
leave this matter to the minutes of the meeting. 

He then would ask if the Japanese delegates had any observation 
to make on the first paragraph of his draft. 

Baron Shidehara said that he certainly had intended to make some 
observations, but seeing that there was not much time left, he would 
propose to adjourn until a later occasion. 

Japanese Delegation, 

Washington, D. ("'., January Z^, 1922. 

S.TC-26.] 

Annex I. 

January 14, 1922. 
[For the press.] 

Issued hy the Chinese and Japanese delegations. 

The twenty-sixth meeting of the Chinese and Japanese delegates 
relative to the Shantung question was held in the governing board 
room of the Pan American Union Building at 10.30 a. m. to-day. 



272 

The question of the transfer to China by Japan of the administra- 
tion of the former German leased territory of Kiaochow and of the 
surrounding 50-kilometer zone was taken up. The discussion will 
be continued at 10.30 Monday morning, the meeting to-day adjourn- 
ing at 1.30 p, m. 



TWENTY-SEVENTH MEETINa. 

The twent3'-seventh meeting, lield in governing board room, the 
Pan American Union Building, Washington, D. C., at 10.30 o'clock 
in the morning of Monday, January 16, 1922. 

PRESENT. 

China.— Bv. Sao-Ke Alfred Sze, Dr. V. K. Wellington Koo, Dr. 
Chung Hui Wang. Secretaries : Mr. Hawkling Yen, Mr. T. C. Yen, 
Mr. C. H. Zee, Mr. Chuan Chao, Mr. T. H. Koo. 

Japan. — Baron K. Shidehara, Mr. M. Hanihara, Mr. K. Debuchi. 
Secretaries: Mr. S. Saburi, Mr. E. Kimura, Mr. H. Saito, Mr. T. 
Shiratori. 

Also present as observers : 

The United States of Atnei^lca. — Mr. John Van A. MacMurray, 
Mr. Edward Bell. 

The British Empire. — The Right Hon. Sir John Jordan, 
G. e. I. E., K. C. B., G. C. M. G.; Mr. W. M. Lampson, M. V. O. 

RESTITUTION OF THE LEASEHOLD OF KIAOCHOW. 

Baron Shidehara said that last Saturday, when the meeting had 
adjourned, the Japanese delegates had reserved discussion of para- 
graph 1 of the Chinese formula regarding the question of the resti- 
tution of the leasehold of Kiaochow. In making the reservation 
they had in mind more especially the date of the transfer to China 
of the leased territory. In the first place, he desired to make it 
clear that Japan had absolutely no intention to protract the trans- 
fer of the administration of the former leased territory since there 
would be no advantage or any reason for Japan to do so. The ques- 
tion now before the meeting was how soon it would be practicable 
to effect such transfer. As was known to the Chinese delegates, the 
administration which Japan had hitherto conducted in the terri- 
tory had extended to all functions of government; namely, to the 
legislative, executive, and judicial fields. For the conduct of such 
administration there had been established Government offices in 
various parts of the territory. In effecting the transfer of the ad- 
ministration, the records and archives would naturally have to be 
handed over to the Chinese authorities. For instance, there might 
happen to be a number of civil or criminal suits still pending be- 
fore the court. Those cases would have to be handed over to the 
Chinese authorities, together with the relevant documents. There 
also might be a considerable number and quantity of public prop- 
erties to be handed over, for which an inventory would have to be 
prepared and signed by both parties. It appeared that such process 
would naturally take some time and no practical transfer of the 



273 

administration could be effected without such process being gone 
through. Therefore, he would suggest as a practicable way of 
settling the matter, a formula something like the following : 

" Japan shall restore to China the former German leased territory 
of Kiaochow. 

" Immediatelj^ upon the coming into force of the present agree- 
ment, the Chinese Government shall send to Tsingtao a commission 
authorized to make arrangements with the Japanese authorities at 
that port with regard to the transfer of the administration in the said 
territory and of public property used for administrative purposes. 

" Such transfer may be effected in parts and by degrees. It shall 
be completed as soon as possible, and, in any case, not later than 
from the date of the coming into force of this agree- 
ment." 

He hoped that the Chinese delegates would give their consideration 
to the above. 

Dr. Sze said that he had appreciated Baron Shidehara's remarks 
as to the early transfer of the administration of Kiaochow, and fur- 
ther he appreciated the difficulties attending the actual transfer. He 
wondered, however, if Baron Shidehara had any objection to modi- 
fying the first sentence of his formula so that the 50-kilometer zone 
would be expressly mentioned. It went without saying that the zone 
would be included in the transfer. 

Baron Shidehara remarked that it might be awkward to add the 
words " 60-kilometer zone " so long as the word " restore " was to be 
retained. The zone could not belaid to be " restored." 

Dr. Sze suggested the word " transfer " to take the place of " re- 
store." 

Baron Shidehara said that " transfer " would not be pertinent in 
connection with the leased territory. The leased territory was 
China's own territory and would be restored but not transferred. So 
far as the leased territory itself was to be restored, it went without 
saying that no rights or interests would remain with the Japanese in 
regard to the 50-kilometer zone. 

Dr. Sze thought that the Chinese delegates would accept the para- 
graph with a small modificatiaon. Dr. Koo had suggested the fol- 
lowing formula : 

" Japan shall restore to China all the leasehold rights concerning 
the territory of Kiaochow and all the rights relating to the 50-kilo- 
meter zone around the Bay of Kiaochow." 

He wondered whether Baron Shidehara would find it agreeable. 

Baron Shidehara said that really it was a matter of phraseology 
only. Dr. Koo's formula sounded as if Kiaochow was an independent 
state. 

Dr. Sze inquired whether his understanding was correct that no 
administrative machinery had been established in the 50-kilometer 
zone. 

Baron Shidehara replied that he had no information on that point. 
Possibly there might be some offices relating to the railway. 

Dr. Sze said that in order to facilitate the progress of the conver- 
sation, he would agree to the original wording proposed by Baron 
Shidehara with the understanding that the statement made by him 
(Baron Shidehara) in regard to the 50-kilometer zone would be kept 



274 

in the minutes. In regard to the second paragraph he woidd sup- 
pose that the general arrangement would be determined here, leaving 
only detailed matters to be arranged by the commission. He would 
suggest that that point might be made clearer by adding " detailed " 
before " arrangement." 

Baron Shidehara agreed. 

Dr. Sze proposed that there might be added at the end of the 
paragraph some such word as " etc.," because he thought that the 
powei-s intrusted to the commission might be made broader so that 
matters other than the transfer of the administration and of the 
public properties could conveniently be handled by that commission. 
There would be a railway commission, but the commission now under 
discussion might be formed with powers suggested in paragraph 8 of 
the Japanese note of September 7, 1920. Other matters, unforeseen 
now, might come up which could best be intrusted to the commission. 

Baron Shidehara said that the Chinese Government could, of 
course, empower the commission to take np other matters. It was at 
liberty to incorporate this commission in the railway commission. 

Dr. Sze said that the railway commission was a technical commis- 
sion. His proposal Avas that there should be only one commission 
apart from the railway commission. Therefore its functions should 
be made so wide as to extend to other matters than those enumerated 
in Baron Shidehara's draft. 

Baron Shidehara inquired what other matters were in the mind of 
Dr. Sze. 

Dr. Sze said that questions like the salt fields might come under 
that head. And any other question might also come up. 

Baron Shidehara wondered whether those questions could not be 
considered as related to the transfer of the administration. 

Dr. 'Sze said that details in regard to the salt question, or other 
matteis, might come up ; so he would suggest that some words might 
be added to the formula to show that the commission had a broad 
authority. 

After a few discussions a phrase in the following sense was agreed 
upon: 

" The transfer of the administration and public properties in the 
said territory and other matters requiring adjustment." 

Dr. Sze then suggested that it would be advisable to have a Japa- 
nese commission also. There should be one centralized authority to 
which the Chinese commission could come for arrangements. With 
this end in view, he wondered whether a formula, running as fol- 
lows, would be acceptable to the Japanese delegates : 

" The Chinese Government and the Japanese Government will each 
appoint a commission with power to make detailed arrangements for 
and effect the transfer of the administration in said territory and 
of public prof)erties and to settle other matters requiring adjustment. 
The two commissions for the said purposes shall meet immediately 
upon the coming into force of the present agreement." 

According to Baron Shidehara's draft, it appeared as if the Chi- 
nese commission had to go to various Japanese departments for 
negotiation. His whole purpose was to facilitate matters. 

Baron Shidehara suggested the following formula, which was 
adopted : 



275 

" The Governments of Japan and China shall each appoint a com- 
mission with powers to make and to carry out detailed arrangements 
relating to the transfer of the administration and of public property 
in said territory and to settle other matters equally requiring ad- 
justment. 

" For such purposes the Japanese and Chinese commissions shall 
meet immediately upon the coming into force of the present agree- 
ment." 

Dr. Sze said, in regard to the third paragraph, the manner of the 
transfer might be left entirely to the commission. Therefore he sug- 
gested that the sentence, " such transfer may be effected in parts and 
by degrees," should be deleted. He would then alter the next sen- 
tence to read : " The work of the commission shall be completed as 
soon as possible, etc." 

As to the period of the transfer, he thought some time would 
naturally be required. During the period of the transfer legal 
questions might arise, especially in view of the extraterritorial 
privileges. Legal questions and disputes might occur in relation not 
only to Japanese nationals but to residents of other nationalities. 

Baron Shidehara said that if at the time of the transfer there 
■should be pending a lawsuit in which a foreigner was a defendant 
the matter would be taken up by the consul of the defendant's coun- 

Dr. Sze said that what he had in mind was that, for instance, a 
contract might be made during the period of the transfer. Later a 
dispute might arise and one of the parties might claim that the case 
should be handled by the Japanese authorities because the transfer 
had not been completed at the time the contract had been made. He 
therefore thought that the period had better be made as short as 
possible so that there might be fewer legal disputes of this character. 

Baron Shidehara said that those things might very easily be ar- 
ranged between the two commissions. They could decide that cer- 
tain cases would go to the hands of the Chinese authorities on such 
and such a date. 

Dr. Sze said that he had meant such contracts as might be entered 
into during the period of the transfer. He did not mean the cases 
actually pending at that time. A Frenchman and a Chinese might 
make a contract and the Frenchman might find the Japanese laws 
more favorable and contend that his case should be handled by the 
Japanese authorities. It was for the purpose of lessening difficul- 
ties of this sort that he had suggested that the period of the transfer 
should be made as short as possible. He had been alluding to such 
lawsuits simply because they had casually occurred to his mind. 

Baron Shidehara said that, as he had said at the beginning, he 
desired that the transfer should be expedited so far as it was prac- 
ticable. 

Dr. Sze said that it would perhaps be necessary that records should 
le copied and collated, and so forth. 

Baron Shidehara said that at least an inventory should be made 
and duly signed. 

Dr. Sze suggested that one month might be sufficient. 

Baron Shidehara said that he wanted to refer to the home Govern- 
ment, as to the period of the transfer. 



276 

Dr. Sze said that perhaps the point could wait until Baron Shide- 
hara received a reply. He would like to have the period made as 
short as possible to avoid local disputes arising, not only between 
Chinese and Japanese, but in regard to other foreigners. 

Baron Shidehara said that he had, of course, no objection to ex- 
pediting the matter, but he hardly thought one month to be suffi- 
cient, 

D-r. Sze said that the tAvo delegations would leave that point open. 

Baron Shidehara wondered whether, with regard to the taking 
over of the administration, the Chinese Government, on its side, 
would be ready to send officials, judges, police forces, etc., at any 
time. 

Dr. Sze said that all those technical matters would form part of 
the work of the commission. 

Baron Shidehara said that even the preparation of an inventory 
for a Government office would take a week or 10 days. 

Dr. Koo said that in order to make the meaning clearer perhaps 
the phrase " the said transfer and adjustment shall be completed as 

soon as " should be substituted for the phrase " the work 

of said commission shall be completed " 

Baron Shidehara said that such matters as appraisal or valuation 
would take a longer time than the transfer. Therefore such minor 
matters might be left for adjustment at later dates. The most im- 
portant of all was the transfer of the administration. Therefore he 
would suggest deleting the word " adjustment," leaving only the 
word " transfer " in the text. If the adjustment could be completed 
at an earlier date, so much the better. 

Dr. Sze suggested that they would, anyhow, await the answer from 
Tokyo as to the duration of the transfer. The question might be 
left open. 

Baron Shidehara said that it was advisable to, settle the transfer 
as soon as possible and not to make it dependent on the adjustment 
of minor matters. So he would suggest striking out " adjustment " 
just tentatively. 

Dr. Koo said that it would be left there tentatively, the idea being 
that if a longer period than a month were required, it be taken off. 

Baron Shidehara suggested that it might be left in brackets. 

Dr. Sze agreed. The tentative agreement read as follows: 

" 1. Japan shall restore to China the former German leased terri- 
tory of Kiaochow. 

"2. The Governments of Japan and China shall each appoint a 
commission with powers to make and to carry out detailed arrange- 
ments relating to the transfer of the administration and of public 
property in said territory and to settle other matters equally requir- 
ing adjustment. For such purposes the Japanese and Chinese com- 
missions shall meet immediately upon the coming into force of the 
present agreement. 

" 3. The said transfer [and adjustment] shall be completed as soon 

as possible, and in any case not later than from the 

date of the coming into force of this agreement," 



. , 277 

MINES. 

Then the question of the mines was taken up. 

Dr. Sze inquired whether Baron Shidehara had anything to say 
by way of suggestion. 

Baron Shidehara said that he would like to propose that the mines 
which had formerly been appurtenant to the railway should be 
worked as a joint enterprise of the Chinese and Japanese. Of course, 
it would not be possible to arrange the exact details of the under- 
taking here, but he would like, if possible, to have the matter ar- 
ran'ged at least in principle. 

Dr. Sze inquired whether the Chinese delegates could be given 
some idea as to the proposed arrangement and the duration of such 
an arrangement. 

Baron Shidehara said that he had no definite plans in mind. It 
was a matter requiring technical study and examination. It would 
be advisable for both the delegations to agree that a detailed ar- 
rangement should be made later on between comj5etent authorities 
of the two Governments. 

Dr. Sze supposed that the two delegations could touch upon the 
general principles. 

Baron Shidehara inquired what sort of principles was in the mind 
of Dr. Sze. 

Dr. Sze said that the first point was how long such an arrange- 
ment would last. And the second point was' this : He had no definite 
knowledge at all about the mines except that, by the agreement of 
1911, the Germans had limited their activities to only three mining 
areas, namely, Fangtse, Tsechuan, and Chinlingchen. They had 
given up mining rights originally granted for other areas. Dur- 
ing the Japanese occupation he understood Japan had somewhat ex- 
tended mining operations. He had no definite data in what areas 
Japan had started operation since. 

Baron Shidehara inquired whether Dr. Sze could let him know 
what was the period given for the German mining concessions. 

Dr. Sze stated that the original contract with the Germans had 
been made under abnormal conditions. Since those mines were now 
being actually worked, the period might be easy to arrange. 

Baron Shidehara said that he had no book of reference with him 
to show the period given for the German concessions. He wondered 
whether any period had been defined. 

Dr. Koo handed over to Baron Shidehara copies of the treaty and 
agreements concerning the Shantung mines, and stated that, ac- 
cording to his understanding, there was no period mentioned. 

Baron Shidehara said that he had thought that there had been 
special arrangements on that point in regard to the German mining 
concessions. 

Dr. Koo said that the mining concessions were originally granted 
to Germany by the treaty of 1898 ; then another agreement was made 
in 1900. At that time, he understood, the mines formed part of the 
railway. Another agreement was reached in 1911, which consider- 
ably revised the original rights. 

Baron Shidehara inquired whether any arrangement had not been 
made as to the period during which the Germans were to work the 
mines. 



278 

Dr. Koo said not that he recalled. 

Baron Shidehara desired to be informed whether the Chinese Gov- 
ernment preferred a Government or private enterprise to work the 
mines. In other words, he would like to be informed whether the 
Chinese Government would have a joint Japanese-Chinese corpora- 
tion organized. He was, however, not suggesting that; only he 
wanted to know if the Chinese Government had any definite plan. 

Dr. Koo said that no definite plan had been made. He agreed with 
Baron Shidehara that only general principles should now be settled, 
leaving the details to be adjusted locally. Putting aside the ques- 
tion of the period for the moment, it might be advisable now to 
consider the general principle. The idea of the Chinese delegates 
"was that the mining properties should be handed over to the Chinese 
Government in order that a Chinese company might be formed in 
which Japanese and other foreign capitalists, as well as the Chinese 
themselves, might be permitted to invest in conformity with the 
Chinese law. He understood, from the Japanese proposition to con- 
vert the mines into a joint enterprise, that the Japanese desire had 
been that Japanese capitalists should have an equal opportunity with 
others in obtaining or retaining interests in those mines. In sub- 
stance, the Chinese delegates had no desire to object to the Japanese 
j)lan ; but as to the form or manner in which the cooperation of the 
Japanese and Chinese capitalists could be promoted, he thought that 
it could best be arranged through some such instrumentality as a 
Chinese corporation. 

Baron Shidehara inquired whether the meaning of Dr. Koo's state- 
ment was that the mines should be worked not as a Government enter- 
prise but as a private concern. 

Dr. Koo said that he had no prejudged opinion on that particular 
point. He had drafted a formula which might serve as a basis of 
discussion, the formula reading as follows : 

" The Japanese Government will hand over all the mines and min- 
ing properties now in occupation or operation by Japan along the 
Tsingtao-Tsinanfu Railway or in other parts of Shantung to the 
Chinese Government, which will form a Chinese corporation in which 
foreign as well as Chinese capitalists may invest, in conformity wdth 
Chinese law." 

He said that the Chinese law was very liberal on mining enterprises 
and admitted the maximum foreign investment of 50 per cent in any 
mining compan3^ That draft, he might add, was modeled upon the 
formula proposed by the Japanese delegation concerning the enter- 
prises at Tsingtao which were to be operated with Japanese coopera- 
tion. 

Baron Shidehara wondered whether it would not be possible for 
the Chinese delegates just to agree upon general principle that these 
mines should be worked as a Sino- Japanese joint enterprise, in which 
the Japanese and Chinese should have an equal share and an equal 
interest. He had been informed that as to the iron mines, especially 
regarding the sale and export of iron ores, there were certain re- 
strictions in China. He would prefer that the matter should be left 
for further discussion. 

Dr. Koo wondered whether Baron Shidehara meant that he de- 
sired to have more time to examine the Chinese draft before making 
jiny observation upon it. 



279 

Baron Shidehara said that it would not be possible for them at the 
present meeting to decide upon a precise form of the mmmg enter- 
prise The Chinese idea was to form a Chinese corporation—a com- 
mercial concern. He could not say whether it would be a good policy 
to form a Chinese corporation " in conformity with Chinese laws. 
He understood that the Chinese Government laid somewhat compli- 
cated restrictions upon the working of iron mines and the sale of iron 
ores, and that regulations relating to iron mines had formed the 
subject of discussion at Peking. The work of the present conversa- 
tions would be expedited if it was agreed in principle that the mines 
in question should be worked as a joint enterprise in which the Chinese 
would have equal shares. 

Dr. Koo said that the purpose of the Chinese draft was to permit 
foreign participation in those mines, because the Chinese delegates 
knew that to be the Japanese desire. If it was desired, he and his 
colleagues would furnish information as to the laws relative to mines, 
especially iron mines, in China. 

Baron Shidehara said that his understanding was that such mining 
regulations had been the subject of much discussion in Peking and 
that none of the foreign powers had recognized those regulations. 

Dr. Koo inquired whether in that case it would meet Baron Shide- 
hara's approval to take an adjournment now. At the next meeting 
the Chinese delegates would try to furnish the Japanese delegates in- 
formation on the Chinese laws concerning foreign participation in 
the mines. He hoped that the Japanese delegates would, at the same 
time, be able to furnish information concerning the mines now being 
operated by the Japanese in Shantung Province. 

Baron Shidehara said that the Japanese delegates would certainly 
furnish the Chinese delegates the information desired relating to the 
mines actually under Japanese operation. The period was the im- 
portant point, but that must depend upon the form the undertaking 
should eventually take — whether a private or Government under- 
taking or any other form. He was afraid that it would not be 
practicable to try to decide all those matters here. 

THE DEPARTURE OF SIR JOHN JORDAN, 

Dr. Sze said that before the adjournment he would like to say a 
few words to Sir John Jordan on behalf of the Chinese delegation. 
Pie sincerely regretted that Sir John, for whom he and his colleagues 
had entertained not only a high esteem and respect but also affection, 
had to leave for England to-day. He offered his very best wishes 
for a happy journey home. 

Baron Shidehara said that he cordially shared the sentiments just 
expressed by Dr. Sze. He heartil}^ wished that Sir John's journey 
would be a pleasant one Pie and his colleagues would miss his pres- 
ence very much. 

Sir John Jordan said that he appreciated greatly what Dr. Sze 
and Baron Shidehara had said on behalf of their respective delega- 
tions. He was very sorry that he had to leave them now for private 
reasons. He only hoped that an early solution would be reached on 
the Shantung question. He also hoped that all far eastern questions 
would be solved and happy and good international relations would 
prevail in the Far East. 



280 

The meeting adjourned at 1 o'clock until 10.30 to-morrow morning. 
Washington, D. C, January 16, 1922. 

SJC-27.] 

January 16, 1922. 
[For the i^ress.] 

Issued hy the Chinese and Japanese delegations. 

The twenty-seA^enth meeting of the Chinese and Japanese dele- 
gates was held in the governing board room of the Pan- American 
Union Building at 10.30 o'clock this morning. 

An understanding w^as reached as to the transfer to China by 
Japan of the administration of the former leased territory of Kiao- 
chow. The question of the mines was taken up and will be continued 
at the next meeting. 

The meeting adjourned at 1 p. m. until 10.30 to-morrow morning. 



TWENTY-EIGHTH MEETING. 

The twenty-eighth meeting, held in governing board room, the 
Pan American ITnion Building, Washington, D. C, at 10.30 o'clock 
in the morning of Tuesday, January 17, 1922. 

PRESENT. 

China. — Dr. Sao-Ke Alfred Sze, Dr. V. K. Wellington Koo, Dr. 
Chung Hui Wang. Secretaries: Mr. Hawkling Yen, Mr. T. C. Yen, 
Mr. C. H. Zee, Mr. Chuan Chao, Mr. T. H. Koo. 

Japan. — Baron K. Shideha^a, Mr. M. Hanihara, Mr. K. Debuchi. 
Secretaries: Mr. S. Saburi, Mr. E. Kimura, Mr. H. Saito, Mr. T. 
Shiratori. 

Also present as observers : 

The United States of Amenca. — Mr. John Van A. MacMurray, 
Mr. Edward Bell. 

The British Emjnre.—MT. M. W. Lampson, M. V. O.; Mr. F. 
Ashton-Gwatkin. 

Dr. Koo said that toward the end of yesterday's meeting both 
delegations had reached the point where the Chinese delegates, on 
their side, promised to look up laws and regulations relating to iron 
mines in China, and the Japanese delegates, on their part, undertook 
to furnish the Chinese delegates with information as to the present 
situation of the mines operated by the Japanese authorities. 

AVELCOME TO MR. ASHTON-GW^ATKIN. 

Baron Shidehara said that before proceeding with the discussions 
of the question of the mines he would say a few w^ords by way of 
welcoming Mr. Ashton-Gwatkin to be present at the meeting. It 
was a matter of great regret for them to lose Sir John Jordan, but 
the loss was now compensated by the presence of Mr. Gwatkin as one 
of the British observers. 



281 

Dr. Koo replied that he heartily associated himself with the 
remarks just made by Baron Shidehara. He and his colleagues were 
glad to have Mr. Gwatkin with them. 

Mr. Ashton-Gwatkin thanked the delegates for their words of 
welcome. 

MINES. 

Baron Shidehara said that he had promised that as much informa- 
tion as was in the possession of the Japanese delegates regarding the 
present situation of the mines operated by Japan would be furnished. 
There Avere three mining districts actually operated by the Japanese 
authorities, namel5^ Tsechuan, Fangtse, and Chinlingchen. Those 
districts had been specified to be exclusively operated by the Schan- 
tung Bergbau Gesellschaft under the agreement of 1911. Japan had 
been operating those mines, but none outside the specified district, 
nor had she made any extensions of mining areas over and above 
those defined in the Sino-German agreement. The mines operated 
by Japan were: 

(1) Tsechuan coal-mining district, covering an area of 418 square 
kilometers. According to the latest statistics, 468,800 tons of coal 
Avere produced and the production was yearly increasing. 

(2) Fangtse coal-mining district, covering an area of 528 square 
kilometers. The Germans had concentrated their enterprise on these 
mining areas, but the results had been very unsatisfactory. But 
under the Japanese management good results had come to be ob- 
tained, especiallv since 1917, until the daily output now amounted to 
400 tons. 

(3) The Chinlingchen iron-mining district, covering 283 square 
kilometers. As soon as the Japanese authorities had taken over the 
management in 1916 the necessary arrangement for mining iron ore 
had been made. In 1918 the more important of the mines the oper- 
ation of which had been started but discontinued by the Germans had 
teen taken up. The surface equipment had also been completed on 
those mines. The first one was produced in 1919. According to the 
latest statistics, the output amounted to 178,800 tons. He supposed 
the figures given here represented yearly production. 

The above was the sum and substance of the information in the 
hands of the Japanese delegation. 

Dr. Koo said that the Chinese delegates understood that several 
mines or several new shafts had been opened since the Japanese had 
taken possession of the mining properties. 

Baron Shidehara said new shafts possibly, but not new mines. 
The Sino-German agreement of 1911 had contained the district 
of Chantien, but apparently that district had been abandoned by 
the Germans. At any rate, it was not being operated by the Japanese. 

Dr. Koo said that the Chinese report showed that at several points 
mining operations were being carried on by Japan beyond the origi- 
nal areas. It was not, however, the intention of the Chinese dele- 
gates to take up that point at present. These special points might 
be arranged locally. On the question of the Chinese mining regula- 
tions, especially those concerning iron mines, he would offer the fol- 
lowing for the information of the Japanese delegates. 



282 

According to the temporary regulations, issued on November 27, 
1915, iron mines were made an exception from tlie general mining 
regulations. The substance of these temporary regulations concern- 
ing iron mining was that those iron mines were placed under the 
general supervision and control of the Chinese Government; that 
private people could own iron mines only under the special permis- 
sion of the ministry of agriculture and commerce ; that foreign capi- 
tal could not be admitted in iron-mining enterprises ; that the sale of 
ore to foreigners required special sanction of the said ministry ; and 
that in granting iron-mine concessions the Chinese Government was 
to retain the right of priority of buying out the mining interests. 

That was the gist of the temporary regulations which were still in 
force. 

He asked whether the Chinese draft was to be taken up as the. 
basis of discussion. 

Baron Shidehara said that in the Chinese draft it was proposed 
that the Chinese Government should form a Chinese corporation in 
which foreign, as Avell as Chinese, capitalists might make invest- 
ment in conformity with the Chinese law. Now, if he understood 
correctly, there was so far no company act in China which was in 
actual operation. The status of the Chinese company was somewhat 
difficult to define. It was not clear Avhat Avas precisely the status of 
the Chinese company, whether it was a juridical person in its (-xact 
sense or Avhether it was of a limited or unlimited liability, or what 
would be the relations between the company and the shareholders. 
With regard to the Chinese law governing mines, he understood, as 
he had stated yesterday, that those regulations had formed the sub- 
ject of discussion in Peking and that so far none of the Governments- 
of the treaty powers had yet recognized the Chinese mining regula- 
tions which had been published but were not yet in actual operation. 
In this situation it was difficult for the Japanese delegates to :ig}-ee 
to organize for the mining business in Shantung a Chinese company 
under the Chinese hiAv. The question seemed to involve many com- 
plicated issues which they were not in a position to arrange at tli is 
meeting. So he would propose that something of this nature might 
be agreed upon here : 

" The mines of Tsechuan, Fangtse, and Chinlingchen, for which 
the mining rights Avere formerly granted by China to German inter- 
ests, shall be operated jointly by Japan and China on an entirely 
equal footing. 

"The mode and terms of such joint enterprise shall be arranged 
betAveen the Japanese and Chinese commissions which are to be ap- 
pointed for that purpose, and which shall meet immediately upon 
the coming into force of the present agreement." 

It would be difficult to go further than that just at present. 

Dr. Koo said that while waiting for the typewritten copies of 
Baron Shidehara's formula to come in he desired to make some re- 
marks in order to elucidate the status of the commercial association 
in China. China had promulgated regulations defining rights, 
duties, and status of companies, as Avell as the rights, duties, and 
status of individual merchants, and recognizing commercial organi- 
zations as legal persons. He had before him company ordinances 
promulgated by ordinance No. 25 of January 13, 1914, which was 



283 

revised by ordinance No. 129 of September 21, 1914. He had also 
before him ordinance No. 27 of March 2, 1914. He might add that 
these commercial-association ordinances were modeled in the main 
on the Japanese Commercial Code in that, for instance, it recognized 
four kinds of commercial associations. These laws and regulations 
had so far been working to the satisfaction of foreign as well as 
Chinese commercial interests. Not long before one of the largest 
American companies had organized a new company and registered 
it as a Chinese corporation in conformity with the provisions of these 
laws and regulations. He was referring to the Du Pont-De Sales 
Co. There were several other examples. In regard to the mining 
regulations, both of November 11, 1914, and the temporary regula- 
tions of November 27, 1915, that was, of course, a general rule, but 
so long as they remained in force the Chinese delegates were power- 
less to act otherwise. The question immediately before the meeting, 
however, was a particular one, and he hoped that it would not be 
difficult to reach an agreement on a general principle which should 
guide settlement of the question. As a point of information he 
desired to ask whether, according to the Japanese records, the min- 
ing districts of Tsechuan, Fangtse, and Chinlingchen were the only 
mines now being operated by Japan. 

Baron Shidehara said it was exactly the case. 

Dr. Koo asked if there were any other mines either occupied or 
operated by Japan. 

Mr. Hanihara said that there might possibly be Japanese indi- 
viduals interested in mines besides those appurtenant to the railway. 

Baron Shidehara said that it was entirely a different question. It 
was not a question of concessions obtained by the Japanese Gov- 
ernment. 

Dr. Koo said that, so far as those cases were concerned, should 
individual Japanese mine operators fail to produce permits duly 
issued by the Chinese Government, the matter could easily be dealt 
with in accordance with the Chinese law. It was not necessary to 
include that in the present question. 

Baron Shidehara said that what Mr, Hanihara had mentioned 
referred to those mines for which concessions had been given by the 
Chinese Government. 

Mr. Hanihara said that what he meant was that there might be 
Japanese individuals who had obtained mining interests directly 
from the Chinese Government, and that these had no connection 
whatever with the present question. 

Dr. Koo said that those cases could be dealt with according to the 
Chinese law. The Chinese viewpoint in regard to the main question 
was that the cooperation of Japanese capital with Chinese capital 
in this mining enterprise was admissible under the existing Chinese 
laws with the exception of the iron mines. Of the three mines under 
consideration, two were coal mines, the Chinlingchen only being an 
iron mine. This iron mine was comparatively of limited interest 
and importance from the Japanese point of view, both in regard to 
its output and to the outlay of capital. 

Baron Shidehara said that the iron mine of Chinlingchen was sup- 
posed to be a very important one. It was not very successful under 
the Germans, but it now seemed to be very promising. It was only 
in 1919 that the first ore was produced. 



284 

Dr. Koo asked what its capitali/.ation was according to the Japanese 
information. 

Baron Shidehara said that there were no figures available at pres- 
ent, but, according to the information which he had just offered 
to the Chinese delegates, the surface equipment of the mines had 
recently been completed, so it appeared that a great deal of money- 
had been spent for the exploitation of the mines. 

Dr. Koo said that as the Chinese delegates understood, however, 
the Chinlingchen mines formed only a small part compared to the 
value of the mining properties of the other two districts. The 
point he had explained was this, that with reference to the coal 
mines, the Chinese draft would practically give the same result as 
the Japanese draft, so far as cooperation of Chinese and Japanese 
capitalists was concerned. As regarded the iron mines of Chinling- 
chen, he hoped that the Japanese delegates would see the difficult 
position in which his delegation stood, in view of the temporary 
regulations concerning iron mines, but the Chinese delegation knew 
that the Japanese interest was in the output of this mine, so they were 
prepared to make arrangements concerning the supply of iron ore 
from that mine. 

Baron Shidehara said that he hoped the Chinese delegates would 
take into consideration the fact that, under the German regime, 
China had granted concessions to the Germans. There was no ques- 
tion of granting new concessions, but the question was one of the con- 
tinuation of concessions already granted. 

Dr. Koo said that it was true, but that the difficulty was this, that 
those concessions had been granted to Germans. In order that they 
might be operated b}'^ another party, there had to be a new grant. 

Baron Shidehara said that if the new mining regulations stood in 
the way of the Chinese delegates they could very well say that the 
Shantung mines should be excluded from the application of these new 
rules, because some of the treaties China had entered into with 
foreign powers — for instance, with the United States — provided that 
China should recast her mining law in such a way as would offer 
no impediment to the employment of foreign capital and that China 
should permit the nationals of those foreign powers to carry on 
mining operations on Chinese soil. 

Dr. Koo said that it would be so if the law was recast. 

Baron Shidehara said that China undertook to recast her law to 
attract foreign capital. 

Dr. Koo said that it was possible the Chinese Government would 
desire to attract foreign capital by modifying the mining law, but 
until that was done the present law remained in force, and the Chinese 
delegates did not see how they could justify themselves in " putting 
the cart before the horse." 

Baron Shidehara said that the actual status of the Chinese laws 
and regulations were difficult to determine. A number of these laws 
and regulations had been published without actually being put into 
effect. For instance, the mining regulations had been promulgated, 
but foreign Governments had protested because some of the regula- 
tions were inconsistent with their treaty rights. But it was very 
difficult to know the actual status of these laws and regulations. It 
was known that these rules had been promulgated, but it was not 
known whether they were actually in general operation in China. 



285 

Dr. Koo said that it was not the Chinese view. So far as the 
Chinese delegates knew, these rules had not only been promulgated, 
but put in force. They did not know any instance of mining con- 
cessions granted by China contrary to these regulations. 

Baron Shidehara said that it might possibly be so, but still it was 
the fact that none of the powers concerned had recognized those 
regulations. 

Dr. Koo said that the question of the status of the mining regu- 
lations, so far as foreign mining interests were concerned, was a 
general one. He wondered if it would be advisable for the two 
delegations to try to determine here that general question either one 
way or the other. 

Baron Shidehara said that in his draft he had tried to avoid that 
issue. It was very difficult to say definitely either one way or the 
other. 

Dr. Koo said that the object of the Chinese draft was to meet 
the Japanese desire to participate in those mines after they were 
turned over to China. 

Baron Shidehara said he noticed that the Chinese draft was some- 
what contradictory in respect of the iron mines. It said that the 
Japanese Government would hand over the mining properties to 
the Chinese Government and that the latter would form a Chinese 
corporation in which Japanese capitalists might invest. Now, the 
Chinese delegates said that by the general law the employment of 
foreign capital in iron-mine industry was not permitted. 

Dr. Koo said that the latter part of his draft said " in conformity 
with Chinese law " ; that part was, therefore, subject to the laws now 
in operation in China. 

Baron Shidehara said that was exactly the case, and that, therefore, 
it proposed to exclude the Chinlingchen iron mines from the scope 
of the joint enterprise. 

Dr. Koo said that in view of the special regulations concerning 
iron mines the Chinese delegates had stated that they were ready 
to undertake to make arrangements concerning the supply of iron 
ore from the Chinlingchen mine. 

Baron Shidehara said that still that was not permitted by the 
Chinese law. He wondered if the Chinese delegates meant that a 
special permission would be given. 

Dr. Koo said that the Chinese Government would give such 
special permission. 

Baron Shidehara said that it was difficult for the Japanese dele- 
gates to agree to the exclusion of the Chinlingchen mines from the 
joint enterprise. The Chinese delegates had a very good reason to 
explain that with regard to those mines concessions had already 
been granted to the Germans and that there was no question of grant- 
ing new concessions. 

Dr. Koo said that the real situation was this: That the rights 
formerly given to the Germans were, according to all expectations, 
to be restored to China. People of China, as well as of all other 
countries, were looking forward to that result. If in arranging that 
restoration a new grant of concessions were to be made, contrary to 
the regulations now in force in China, it would be readily seen how 

93042—22 19 



286 

difficult it would be for the Chinese delegates to explain the matter to 
the satisfaction of their Government or people. 

Baron Shidehara said that he did not think all nations expected 
that the economic rights in Shantung should be given to China. The 
Chinese delegates must remember that in Paris it had been agreed by 
the nations represented there that Japan should retain economic 
rights. The mining rights were purely economic rights. 

Dr. Koo said that it would be difficult to say, however, that those 
authorities in Paris had intended that China should be called upon 
to act contrary to her own laws. 

Baron Shidehara said that if the legal reasons of the Chinese diffi- 
culty were to be emphasized too much it would necessarily lead to 
complicated issues, which it was the intention of the Japanese dele- 
gates to avoid as much as possible. 

Dr. Koo hoped that the Japanese delegates would see the difficulty 
confronting the Chinese delegates in regard particularly to the ques- 
tion of the iron mines in the fact of these regulations of 1915. Be- 
sides, with China it was more than a question of this particular 
mine — it raised the question of the general status of the iron regu- 
lations. 

Mr. Hanihara asked if the Chinese delegates could not take into 
consideration the actual facts. The actual fact was that the mines 
were in the hands of Japan. If the Chinese delegates pressed the 
matter too hard it necessarily led to the discussion of the Japanese 
rights in Shantung, which ine Japanese delegates desired to avoid as 
far as possible. It would be ditl'erent if it were required of China to 
open a new departure. Dr. Koo had said that the matter would in- 
volve a new grant of concessions. It might be made to appear so, but 
it was not so for all practical intents and purposes. If, however, 
China agreed, Japan would just retain those concessions as they were 
at present. He wondered if the Chinese delegates did not think it 
better to proceed on a compromise and agree here to the plan of joint 
operation on equal terms and on a fair basis. The details of the plan 
might be w^orked out by the Japanese and Chinese commissions. He 
thought it was a most reasonable and proper way of settling the 
matter. The Chinese delegates would be able to say that Japan so 
far conceded as to be willing to operate these mines at present pos- 
sessed by her as a joint enterprise on equal terms with China. That 
seemed to be a highly fair proposition from a practical point of view. 
If the legal side of the question w^as to be insisted upon, there would 
be no end. 

Dr. Koo said there was a great difference between possession and 
ownership or title. But that was not the point. The Chinese dele- 
gates looked on the matter from a practical point of view. So far 
as the cooperation of the Japanese and Chinese capitalists was con- 
cerned the Chinese delegates had no objection to that at all. But in 
the face of the regulations now imposed in China the Chinese dele- 
gates felt that they had to act in a way not contrary to those regula- 
tions. If there were any way for overcoming the difficulty, he a*hd 
.his colleagues would welcome any suggestions from the Japanese 
delegates. 

Mr. Hanihara said that it seemed to him his Chinese friends could 
well explain the matter to their people. If they insisted upon apply- 



287 

ing Chinese regulations to the Shantung mines, Japan would have to 
insist upon retaining the Chinese mines. It could not be expected 
that Japan should give up all her interests. There must be some 
way of adjustment. It was not a question of granting new conces- 
sions but merely the continuation, so to speak, of existing conces- 
sions. Japan was going a step forward in proposing to make it a 
joint enterprise. She considered it a concession on her part. The 
two delegations were meeting there in a friendly spirit and he and 
his colleagues had no intention of pressing that point too much. 
What the Japanese delegates desired was a general agreement, for 
they could not enter into details. They did not liave any special 
far-reaching plan in mind. Their idea was that Japan should retain 
an interest in those mines on a fair basis. 

Dr. Koo said that in this question the Chinese delegates were 
laboring under a handicap and the Japanese had the advantage over 
them, because there was no law in Japan against relinquishing the 
mining rights in Shantung, while the Chinese delegates had those 
regulations in their face concerning the iron mines. Not that the 
Chinese delegates did not appreciate the Japanese point of view, 
but they did feel there was a difficult problem before them which 
had to be overcome. He would suggest dividing the formula into 
two parts and leaving aside the question of iron mines for the moment 
just to facilitate the discussions. 

Baron Shidehara said that he was afraid the suggested method 
might weaken the Japanese position. As Dr. Koo must see, the 
Japanese delegation placed much weight on the iron mines, but the 
Chinese mining regulations did not recognize foreign interests in 
Chinese mining enterprises. Those regulations seemed to be incom- 
patible with the treaty rights of foreign powers, and, as he under- 
stood, those foreign powers had protested against them. 

Dr. Koo said that he had suggested separation of the subject 
purely as a temporary step to facilitate the discussion, without com- 
mitment on either side of its position. 

Baron Shidehara said that he would agree to consider the two 
coal mines if it was to be understood that the Japanese proposal 
regarding the Chinlingchen iron mines would not be prejudiced. 

Dr. Koo said that, with regard to the coal mines, the Chinese and 
Japanese drafts were in substance much the same. The Chinese 
delegates tried to avoid characterization of the joint enterprise and 
proposed the formula of a Chinese corporation. He hoped that the 
Japanese delegates would have no serious objection to the Chinese 
draft in that respect. So far as coal mines were concerned, the 
Chinese regulations admit foreign capital to the extent of 50 per cent 
of the whole capital of a mining company. He understood that by 
"operated jointly by Japan and China on an equal footing" was 
meant that Japan and China should each have a half interest in the 
mines. 

Baron Shidehara said that, as he had already explained, it was 
difficult for the Japanese delegates to agree to the plan of Chinese 
corporation. It did not seem practicable to examine Chinese laws 
governing associations or corporations, and therefore he would like 
to avoid that point. 

Dr. Koo asked whether it was the Chinese law or the Chines^ cor- 
poration wjiich Baron Shidehara desired to avoid 



288 

Baron Shidehara said it was both. With regard to the Chinese 
laws, he had stated that they had formed the subject of protest by 
treaty powers. With regard to the Chinese corporation, he must say 
that the matter involved many complicated issues. Before agreeing 
to the Chinese draft, it was necessary for him to be precisely in- 
formed on the details of the Chinese company acts or ordinances. If, 
however, he understood correctly, those Chinese ordinances had been 
promulgated, but were not in actual operation. There might be some 
foreign interests which had formed companies under those laws, but 
it did not seem that those laws had been in general operation. He 
hoped that the Chinese delegates would agree to leave for subsequent 
consideration the question as to whether a commercial corporation 
should be organized to engage in the mining enterprise. It might 
be good policy to form a corporation, but for the time being, to expe- 
dite the matter, it seemed to him more practicable to make a special 
arrangement between the two Governments to carry on this enter- 
prise as a joi7it Sino- Japanese GovernTnent enterprise^ of which 
arrangement the mode and terms should later be determined by the 
representatives of the two Governments. It would be better to post- 
pone to a future occasion the question of the organization of a com- 
mercial corporation and whether that corporation should be organ- 
ized under Japanese or Chinese law. 

As the Chinese delegates must see, this was a question w^hich 
involved no political consideration. Again, it was different from 
the question either of the railway or of the public utilities, in that 
the general public did not have any interest in the mines. So he 
hoped that the Chinese delegates would just agree in the present 
case to a general idea of joint enterprise, leaving the Japanese and 
Chinese commissions to work out the detailed mode and terms of 
that joint enterprise. He did not think the matter could be the sub- 
ject of public misapprehension. 

Dr. Sze said that the legal difficulty involved in the question stood 
in their way. The Chinese delegates had proposed to meet the 
Japanese point of view as far as the supply of the mining output 
was concerned. 

Baron Shidehara asked if Dr. Sze was not referring again to the 
question of the Chinlingchen iron mines. 

Dr. Sze said that there was also legal difficulty with regard to the 
coal mines, but Dr. Koo was trying to draft a formula to meet the 
difficulty in that regard. 

Dr. Koo said that, as far as the coal mines were concerned, he 
hoped the Japanese delegates would accept the Chinese draft, inas- 
much as under the present law foreign participation was to be 
admitted up to 50 per cent of the capital of a mining company. 

Baron Shidehara said that, as he had already pointed out before, 
he did not like any specific reference to be made to the Chinese cor- 
poration and the Chinese law. That would create difficulty on the 
Japanese side. He would avoid that and simply say " joint Sino- 
Japanese enterprise." 

Dr. Koo said that as it stood the Chinese law concerning coal mines 
permitted foreign participation to the extent of 50 per cent. He did 
not think the Japanese delegates had any objection to those general 
mining laws. So far as company laws and the general legal status 
of traders were concerned the Chinese delegates were not so far 



289 

aware of any protest made, but, on the contrary, there were several 
groups of foreign interests which had formed companies and regis- 
tered them under those laws. There was another point making it 
necessarj' why there should be a Chinese corporation created in 
conformity with Chinese law; the coal mines of Shantung would 
stand in such close relations with the Shantung Railway. The rail- 
way must depend to a large extent on their output for the fuel used 
on the line. The mines would be dealing mainly with Chinese people, 
so the people in charge of the administration of those mines should 
be Chinese. He should think that all contracts this mining com- 
pany would enter into for the sale of the coal would have Chinese 
as parties thereto. 

Baron Shidehara said that he did not exactly understand what was 
the legal obstacle which stood in the way of the Chinese delegation 
agreeing to the Japanese plan, at least so far as the coal mines were 
concerned. They had said that the Chinese laws permitted foreign 
capital to the extent of 50 per cent of the capitalization. The Japa- 
nese draft was made exactly in that sense. In the mining operation 
China would be placed on an entirely equal footing with Japan. 

Dr. Koo said that so far as the coal mines were concerned the 
Chinese delegates were prepared to meet the Japanese point as far 
as possible b}'^ modifying their formula. He would suggest putting 
after the words " Chinese Government " the phrase " to be con- 
ducted on a basis permitting the investment of foreign as well as 
Chinese capital." He would then suggest adopting the second para- 
graph of the Japanese draft, excepting the words " joint enterprise," 
and substituting therefor " such foreign investment." In making 
those suggestions he did not desire to be understood as modifying the 
attitude of the Chinese Government concerning the application of 
the Chinese laws, but, on the other hand, the suggested form would 
not commit the Japanese views on the subject either. 

Baron Shidehara wondered how the following simple formula 
would strike the Chinese delegates : 

" The Japanese Government will hand over to a combination of 
Chinese and Japanese capital the mines of Chinlingchen, Tsechuan, 
and Fangtse." 

He suggested striking out from the Chinese formula the phrase 
" all the mine^ and mining properties, etc.," and mentioning instead 
the three mining districts. He did not quite like to use the broad 
terms of the Chinese formula, because the phrase seemed to imply 
that there were a great many mines in Shantung occupied and oper- 
ated by Japan. That was not at all the case, there being practically 
only three mines which were in question. He also modified the second 
paragraph of the original Japanese formula, as follows : 

" The mode and terms of such arrangement shall be determined 
by the Chinese and Japanese commissions, which are to be appointed 
for that purpose and which shall meet immediately upon the coming 
into force of the present agreement." 

Dr. Koo said that, in the first place, he had no objection to omit- 
ting the general phrase concerning the location of the mines, since 
it had been stated that there were only three mines. In the second 
place, he wondered whether, in using the phrase " combination of 
Chinese and Japanese capital," Baron Shidehara meant that the 
mining properties should be handed over from the Japanese Govern- 



290 

nient directly to this group. He wondered how that could be done. 
It would be better that these properties should be handed over to 
the Chinese (Tovernment, to be conducted by Chinese and Japanese 
capitalists. The handing over must be to the Chinese Government 
first. 

Baron Shidehara said that the mines would then become the prop- 
erty of the Chinese Government. 

Dr. Ivoo wondered Avhether investment of capital would not carry 
with it some interest in the property. The mines were to be con- 
ducted hv Chinese and Japanese capitalists. 

Baron Shidehara said that his idea had been to turn it over, not 
to the Chinese (lovernment, to be made part of the Government 
property, but to a combination of Chinese and Japanese capital. It 
was entirely different from the case of the Shantung Railway. 

Dr. Koo said that the Chinese plan did not mean to turn the mines 
over to Govei'nment enterprise. 

Baron Shidehara said that if turned over to the Chinese Govern- 
ment they would naturally become Government properties. 

Dr. Koo said that they would be turned over first to the Govern- 
ment in order to be conducted by Chinese and Japanese capitalists. 

Baron Shidehara said that the word " conduct " might not be 
appropriate. In any case, it would mean conducting business only. 

Dr. Koo said that that word could have a broad meaning. 

Baron Shidehara said that he thought that conducting mine's 
might not be a happy phraseology. He had used the word " capital " 
advisedly in order to leave room for the Governments to conduct the 
business for the time being. The word " capitalists " (Dr. Koo had 
suggested using "capitalists" in place of ''capital" in Baron Shide- 
hara's draft) implied private concerns. 

Dr. Koo said that the word '' conduct '' might mean both (rovern- 
ment or private enterprise, though it might not be good English. 

Baron Shidehara said that the point of difference between the 
Chinese and Japanese drafts was that the Chinese draft provided 
that the mines should become Chinese Government property first, 
while the Japanese draft simply proposed that the business should 
be conducted on the basis of equal share and equal interest. 

Dr. Koo said that, in proposing that the mines should be handed 
over to the Government, he had done so only because he coukl see no 
other Avay. If the mines were to be handed over to a combination 
of capital, the group would have to go to Tolry^o to deal with the 
Japanese Government. 

Baron Shidehara said that that was not the case at all. It would 
be the commission to be set up that would determine the mode and 
terms of the combination. The seat of the group could be fixed in 
Shantung, Tokyo, or Peking. 

Dr. Koo said that he had not yet clearly understood Baron Shide- 
hara. He wondered whether the Japanese proposal Avas to leave 
open the question whether it should be a Government enterprise or 
private enterprise, or whether a private enterprise was preferred 
by Japan. 

Baron Shidehara said that on that question he was not quite pre- 
pared to express a definite opinion. Perhaps it might be a wise 
policy to turn the mines over to private enterprise, but for the time 



291 

being they might be worked as a joint Chinese- Japanese Govern- 
ment enterprise. In any case, that question could best be decided 
by the commission. He' preferred not to say one way or the other 
just now. He simply proposed to determine the general principles 
as to how those mines should be worked in future. 

Dr. Koo proposed another formula, reading: 

" The Japanese Government will hand over the mines in Shantung 
to the Chinese Government to be conducted by Chinese and Japanese 
cooperation whether as a Government or private enterprise." 

Baron Shidehara said that Dr. Koo still insisted upon handing 
the mines over to the Chinese Government. That was the point he 
had objected to. The Japanese proposal was that the ownership and 
operation of the mines should rest with a combination of Japanese 
and "Chinese capital. 

Dr. Koo said that he could not see who were to hand over the 
mines to the combination. 

Baron Shidehara said it Avould be the Japanese Government, 
which was actually operating those mines, that would hand them 
over to the combination or group. 

Dr. Koo wondered whether that group would hold the mines by 
charter from the Japanese Government. 

Baron Shidehara said that that would be effected by the present 
agreement. The agreement would have the character of a charter. 
The terms and the conditions of the financial combination would be 
determined by paragraph 2 of the draft under consideration. 

Dr. Sze said that it was now nearly 1 o'clock and he would prefer 
to study the draft overnight, and see if the Chinese delegates could 
bring forward new formulae. He hoped the Japanese delegation 
would in the meantime think the matter over. 

Baron Shidehara said that he had no objectioii to the adjournment 
of the meeting. He wanted the Chinese delegates to understand 
that he placed much importance on Chinglingchen mines. Those 
mines were supposed to be very promising. It would not be possible 
for Japan to give up those mines, the concessions for which had 
been given to German interests. 

Dr. Sze said that the operation of the mines would naturally be 
continued, and as to the supply of the iron ore, the Chinese delega- 
tion had said that due consideration would be given to the Japanese 
demand. 

Baron Shidehara said that that would not meet the Japanese pur- 
pose. Japan had been desiring that an equal share and interest 
should be retained in those mines. 

Dr. Sze said that financial participation would be allowed to 
Japanese nationals. 

Baron Shidehara wondered whether Dr. Sze admitted that finan- 
cial participation would be allowed in relation to the iron mines. 

Dr. Sze said that he had meant the coal mines. 

Baron Shidehara thought that they had just been referring to 
iron mines. 

Mr. Hanihara said he believed that in adopting the Japanese 
formula, the legal difficulty mentioned by the Chinese delegates 
could be avoided. Matters of detail could be left to subsequent 
arrangement by the commission, which would work out some suitable 
scheme. 



292 

The meeting took an adjournment at 1 o'clock p. m. to meet to- 
morrow at 10.30 a. m. if the delegates were disengaged; if not, to- 
morrow afternoon. 

Japanese Delegation, 

Washington^ D. 6'., January 17^ 1922. • 

SJC-28.] 

January 17, 1922. 
[For the press.] 

Issued hy the Chinese and Japanese delegation. 

The twenty-eighth meeting of the Chinese and Japanese delegates 
took place at 10.30 o'clock this morning in the governing board room 
of the Pan American Union Building:. 



at 



The question of mines was discussed and the meeting adjourned 
1 p. m. until 10.30 a. m, Wednesday morning. 



TWENTY-NINTH MEETING. 

The twenty-ninth meeting, held in governing board room, the Pan 
American Union Building, Washington, D. C., at 4 o'clock in the 
afternoon of Wednesday, January 18, 1922. 

PRESENT. 

China. — Dr. Sao-Ke Alfred Sze, Dr. V. K. Wellington Koo, Dr. 
Chung Hui Wang. Secretaries : Mr. Hawkling Yen, Mr. T. F. Hsu, 
Mr. C. H. Zee, Mr. Chuan Chao, Mr. T. H. Koo. 

Japan. — Baron K. Shidehara, Mr. M. Hanihara, Mr. K. Debuchi. 
Secretaries: Mr. S. Saburi, Mr. E. Kimura, Mr. H. Saito, Mr. T. 
Shiratori. 

Also present as observers: 

The United States of Amei^ica. — Mr. John Van A. MacMurray, 
Mr. Edward Bell. 

The BHtish Empire.— Mr. M. W. Lampson, M. V. O. ; Mr. F. Ash- 
ton-Gwatkin. 

MINES. 

Dr. Sze said that yesterday the conferees had left unfinished the 
question of the mines. The Chinese delegation had since drawn up 
a new formula which he hoped Baron Shidehara would find entirely 
acceptable. Dr. Koo would read it to the baron. 

Dr. Koo said that in the drafting of the formula the Chinese dele-, 
gates had found it necessary to separate the coal mines from the iron 
mines, for the reason he had stated yesterday and the day before. 
The formula for the coal mines read as follows : 

Annex " A." 

" The coal mines of Tsechuan and Fangtse, for which the mining 
rights were formerly granted by China to German interests, shall be 



293 

operated by a Chinese company to be formed, in which Japanese 
capital may participate to an extent not exceeding 50 per cent of its 
total capital. The mode and terms of such participation shall be 
determined by the Chinese and Japanese commissions which are to 
be appointed for that purpose and which shall meet immediately 
upon the coming into force of the present agreement," 

He might point out that the words " the Chinese company " were 
put in there again because that was the most convenient form to de- 
scribe who was to operate the mines. It did not necessarily mean a 
private concern. It might be a company organized by the Govern- 
ment. There was nothing in that draft which would preclude any 
agreement by the two commissions as to the character which it 
should assume, whether private or public. 

Baron Shidehara asked whether Dr. Koo had any proposition as 
to the iron mines of Chinlingchen. 

Dr. Koo said that it was a very difficult question. The Chinese 
delegates had tried and tried to find some formula which would 
at once meet the difficulties confronting the Chinese delegates on the 
one hand, and on the other hand satisfy the Japanese desire as far as 
possible. He could not say that the Chinese delegates had altogether 
succeeded, but, under the circumstances, they had found a formula 
which he would read to the Japanese delegates, as follows : 

Annex " B." 

"The iron mines of Chinlingchen, for which the mining rights 
were formerly granted to German interests, shall be handed over to 
the Chinese Government, which will pay to Japan their appraised 
value. 

" One-half of this amount will be paid to the Japanese Government 
on the taking over of the said mines and the other half will be paid 
in installments over an agreed period of years. 

" Pending the completion of the said installments the Chinese Gov- 
ernment will enter into an arrangement with the Japanese Govern- 
ment concerning the supply to Japan of the iron ore produced by 
the said mines. 

" The duration of the period for the completion of the payment 
referred to above, the arrangement for the supply of iron ore, and 
other details shall be determined by the Chinese and Japanese com- 
missions to be appointed for adjusting the details of the question of 
the coal mines of Tsechuan and Fangtse." 

Dr. Koo said that the main idea underlying the draft was to meet 
the legal difficulties, which appeared to be almost unsurmountable, on 
the one hand, and on the other to meet the Japanese wishes of having 
an interest in those iron mines, to the production of which Baron 
Shidehara attached so much importance. He would add that the 
draft had been hastily gotten up and was not in the very best form. 
He hoped, however, that it would serve as the basis upon which they 
might come to an agreement. 

Baron Shidehara said that he was afraid that it would be very 
difficult to come to an adjustment upon the lines now suggested. 
Having regard to the history of the matter, he hoped that the 
Chinese delegates would find a way to treat the three mines as a 
case entirely independent of the general application of the Chinese 



294 

mining regulations. He trusted that Dr. Koo Avould realize that the 
Ja})anese position was this: In the first place, those general mining, 
regulations and the specific regulations with regard to the iron 
mines had been made the subject of protest by various powers on the 
ground that they were inconsistent with the terms of various treaties 
10 which China was a party. It was not, therefore, possible for Japan 
to commit herself to anything which might involve a recognition on 
her part of the two sets of regulations in question. In the second 
l)lace, the Japanese delegates believed that the property rights in 
regard to the mines in question were now in the hands of the Jap- 
anese. Japan was now ready to hand over the properties to a joint 
Sino-Japanese combination. It was a case which had not been con- 
templated in the Chinese mining regulations, and the case might 
very well be treated entirely separate from the rest of the mining 
rights in other parts of China. 

He Avould just tentatively suggest an amendment to the Chinese 
proposal, taking the tliree mines together: 

"The mines of Tsechuan, Fangtse. and Chinlingchen. for which 
the mining rights were formerly granteil by China to (rernuin inter- 
ests, shall be handed over to a Sino-Japanese combination, in which 
Chinese and Japanese capital shall stand on an entirely equal 
footing.'' 

Accordingly, the word '" participation " in the second paragraph 
of the Chinese formula " A.'' would be changed to ^ arrangeriient." 

Dr. Koo said that the difficulty appeared to be this: While the 
Chinese delegates appreciated the fact that the Japanese delegates 
could not commit themselves on Chinese mining laws and regulations, 
it would seem to follow that the Chinese delegates should l^e equally 
free not to commit themselves upon those laws and regulations. As to 
the observation of Baron Shidehara, that the property right in those 
mines was in Japanese hands, he wished not to enter into the legal 
aspect of the question. It would be needless to say that the Japanese 
joint of view was not shared by the Chinese delegates. Those rights 
had, as it was stated in the Chinese draft, been granted to German 
interests by the treaty of 1898. It had been stated in the preamble 
of that treaty that it was essentially a commercial treaty, and China 
had made it clear in her declaration of war against Germany that 
all treaties would be abrogated. And the abrogation of commercial 
treaties was not a new thing. The same attitude had been taken by 
Japan in the Shimonoseki treaty. That was again insisted upon by 
Japan at Poitsmouth. He had brought up that point merely to 
elucidate the Chinese point of view. He by no means desired to 
prolong the discussions, but had only referred to that point because 
Baron Shidehara had referred to the matter. 

Reverting to the draft he had prepared, there was one point which 
might have been overlooked by Baron Shidehara, it not having been 
made clear in the draft. In the draft, the Chinese delegates had tried 
their best to meet the Japanese desire to cooperate with the Chinese 
in the mining enterprise without giving too much conspicuity to that 
phase in the formula, in view of the present state of public feeling in 
China. The Chinese delegates had found it necessary to be very 
careful in drafting the arrangement concerning the question of the 
mines. Substantially, he ventured to believe the Chinese draft 



295 

fully met the Japanese wishes to participate on an equal footing with 
China. 

Baron Shidehara said that, in the first place, he knew that in the 
Chinese draft there was no specific reference to the existing Chinese 
mining regulations. But the very reason why the Chinese delegates 
now proposed to treat iron mines separately from the coal mines 
was based practically on the Chinese mining regulations. If there 
were no specific regulations regarding the iron mines, there would 
be no reason why Chmlingchen mines should be -treated separately 
from the case of Tsechuan and Fangtse. In the second place, it was 
true that he had referred to the question of the property rights, but 
it had not been his intention to enter into any detailed discussion 
of the question of treaties or to dwell on the legal phase of the ques- 
tion at all. He had simply mentioned the matter in order to show 
that the Japanese proposal was a great concession on Japan's part. 
Dr. Koo had very properly stated that by the declaration of war com- 
mercial treaties existing before the war could be abrogated. That 
was quite true, but it was equally true that the vested rights, rights 
already granted to private interests of the enemy, could not be dis- 
regarded. The property rights in the mines under discussion had 
certainly been in the hands of private Germans, and without any 
special arrangement with the German Government China had no 
right to confiscate these property rights. Thus a situation had been 
reached where, unless' it was possible to treat the three mines as in 
the same category and under the same terms, it would be very difficult 
to reach an agreement. Those mining properties were in Japanese 
hands, and lawfully so. Japan was now offering to hand over the 
properties to a Sino-Japanese combination in which Chinese and 
Japanese capital would stand on an entirely equal footing. It 
seemed to him a fair adjustment of the mining question. He did not 
think it would be difficult for the Chinese delegates to agree to a 
special arrangement regarding the three mines entirely apart from 
the question of the Chinese mining regulations. In the Japanese 
le vised draft it was simply said that the three mines should be 
handed over to a Sino-Japanese combination, not a Chinese com- 
pany. The plan seemed to be fair to both sides. 

D]-. Koo asked what would be the status of such a combination. 

Baron Shidehara said that there was a number of instances of 
such Sino-Japanese combinations formed and in actual operation. 
There was one called the Chinese-Japanese Industrial Develop- 
ment Co. 

Dr. Koo asked where the last-named company had been registered. 

Baron Shidehara said that he thought the company had been 
registered both at Peking and Tokyo. The president of the com- 
pany was a Chinese, as also was one of the two vice presidents. 

Dr. Koo asked Baron Shidehara to read the revised draft once 
more. 

Baron Shidehara read the draft. He added that, if he remembered 
correctly, it had been in the form now proposed by him that the said 
industrial development comj^any had been organized. It was now a 
very prosperous company. 

Dr. Koo said that it was only an ordinary business company in 
w^hich the general public took little interest. 



296 

Baron Shidehara said that the company was undertaking various 
business. 

Dr. Koo said that as evidence of their genuine spirit of concilia- 
tion, the Chinese delegates were prepared to meet the Japanese 
point by including the question of the iron mines in the same draft 
as the coal mines. As to the form of the expression, however, for 
reasons arising, as already explained, from their knowledge of the 
state of public opinion in China, the Chinese delegates hoped their 
Japanese colleagues would accept a little modification so as to make 
Baron Shidehara 's formula read as follows: 

" The mines of Tsechuan, Fangtse, and Chinlingchen, for which 
the mining rights were formerly granted by China to Germany, 
shall be handed over to a company to be formed by a special charter 
of the Chinese Government, in which the Japanese capital may not 
exceed the amount of the Chinese capital- 

" The mode and terms of such arrangement shall be determined 
by the Chinese and Japanese commissions which are to be appointed 
for that purpose, and which shall meet immediately upon the coming 
into force of the present agreement." 

Baron Shidehara said thut the Japanese delegates would accept 
the suggested formula. 

Dr. Koo asked if the question of mines could now be considered 
as settled. 

Baron Shidehara answered in the affirmative. 

SJC-29.] 

January 18, 1922. 
[For the press.] 

Issued hy the Chinese and Japanese delegations. 

The twenty-ninth meeting of the Chinese and Japanese delegates 
took place at 4 o'clock in the afternoon of January 18, 1922, in the 
governing board room of the Pan American Union Building. 

An agreement was reached on the question of the mines, and the 
meeting took an adjournment at 5.30 p. m. until 3.30 o'clock to- 
morrow afternoon. 



THIRTIETH MEETING. 

The thirtieth meeting, held in governing board room, the Pan 
American Union Building, Washington, D. C, at 4 o'clock in the 
afternoon of Thursday, January 19. 1922. 

PRESENT. 

China. — Dr. Sao-Ke Alfred Sze, Dr. V. K. Wellinoton Koo, Dr. 
Chung Hui Wang. Secretaries: Mr. T. ¥. Hsu, Mr. C. H. Zee, Mr. 
Chuan Chao, Mr. T. H. Koo. 

Japan. — Baron K. Shidehara, Mr. M. Hanihara. Mr. K. Debuchi. 
Secretaries : Mr. S. Saburi, Mr. E, Kimura, Mr. K. Yoshino, Mr. T. 
Shiratori, Mr. N. Sugiyama. 

Also present as observers: 



297 

The United States of America. — Mr, John Van A. MacMurray, Mr, 
Edward Bell. 

The British Empire.— Mv. M. W. Lampson, M. V, O. ; Mr. F. Ash- 
ton-Gwatkin. 

CABLES. 

Baron Shidehara said that the meeting was now to take up the 
question of the cables. 

Dr. Sze said that he understood that there were two former German 
cables which they were to discuss — one, the cable from Tsingtao to 
Chefoo ; and the other, the cable from Tsingtao to Shanghai. 

Baron Shidehara said that he would try to explain the actual situ- 
ation of those cables, so far as he knew. While the Germans re- 
mained in the leased territory of Kiaochow, they had laid two 
cables — one from Tsingtao to Chefoo, and the other from Tsingtao 
to Shanghai. During the war Japan had cut those cables and had 
laid one from Tsingtao to Sasebo, by making use of portions of the 
ex-German cables. According to his information there were about 
130 miles of ex-German cables which still remained hidden at the 
bottom of the sea between Chefoo and Tsingtao, as well as between 
Tsingtao and Shanghai. Such he understood to be the actual 
situation. 

Under the treaty of Versailles the Germans had renounced, in favor 
of Japan, the two cables radiating from Tsingtao, but Japan was now 
ready to renounce all title and right to both these cables. At the 
same time he understood that the Chinese Government had a plan of 
laying a new cable between Chefoo and Shanghai, and orders for the 
cable had been placed with a Japanese concern. If that was the case, 
he hoped that the Chinese Government would see their way to bring 
in that cable to Tsingtao, so that a Shanghai-Tsingtao-Chefoo line 
would be owned and operated by the Chinese Government in the 
interests of the facilities of communications. In regard to the 
Tsingtao-Sasebo cable, he hoped that the Chinese delegates would 
be able to agree that the status quo should be maintained. Of course, 
there was the question of connection with the land line in China to 
be arranged with the Chinese Government. That question also in- 
volved the rights of the Great Northern Co. and the Great Eastern 
Co., and it was necessary that suitable arrangements should be made 
with those companies. Just at this moment it was not possible to 
make detailed arrangements, but he hoped that the Chinese delegates 
would be able to agree to the maintaining of the status quo of the 
Tsingtao-Sasebo line. It was to be understood that Japan would 
renounce her rights in relation to the Tsingtao-Chefoo line as well 
as to the Tsingtao- Shanghai line. 

Dr. Sze inquired whether he had understood correctly that the 
two cables had been cut, part of them being left in the ocean and 
part used for the Tsingtao-Sasebo line. 

Baron Shidehara replied that 130 miles of the ex-German cable 
was left in the sea. 

Dr. Sze inquired what the length of the Tsingtao-Sasebo line 
was. 

Baron 'Shidehara said that he understood that the length was 530 
miles. He might add that if China was ready to bring in the 



298 

Shanohai-Cliefoo line to Tsinirtao she Avoukl, of course, be free to 
make use of the 130 miles left in the ocean. 

Dr. Sze asked Avliere tlie cables were left. 

Baron Shidehara replied that near Shanojhai there were about 
50 miles, and near Chefoo about 30 miles of the cables. Certain 
portions of them were left at the bottom of the sea off the coast 
and the}' could be easily traced. 

Dr. Sze said that, as to the landing in China, on account of agree- 
ments between the Great Xorthern and the Oreat Eastern Companies, 
the Chinese delegates could not authorize the landing to any party. 
According to the agreements, the rights of the companies would 
terminate in 1930. In that year the Chinese Government would have 
the whole system as their own. He added that the Chinese delegates 
took note of Baron Shidehara's statement that Japan would renounce 
her rights in relation to the two cables in question, as well as the 130 
miles still remaining in the ocean. 

Baron Shidehara said that, in any case, in regard to the con- 
nection of the Tsingtao-Sasebo line, it would be necessary for Japan 
to make an arrangement with the (^hinese Government and the two 
companies interested. 

Dr. Sze said that the Chinese delegates had no instructions so 
far except that they could not concede those rights on account of 
the agreements with those two companies. Xeither had the}'' any 
instructions which would authorize them to agree to the construc- 
tion of the new line by way of Tsingtao. They had to communicate 
with Peking before making any answer. 

Baron Shidehara said that he had been informed that contracts 
for the supply of the cable from Japan had been concluded during 
the summer of last A'ear. The cable was now being manufactured in 
Yokohama. 

Dr. Sze said that the Chinese delegates had to refer home on the 
matter. He desired to know, in order to facilitate the consideration 
of the question by the Peking Government, how long Japan desired 
to have that arrangement continue. 

Baron Shidehara replied that at present he had no specific idea as 
to the duration of the arrangement. Such details should be worked 
out later. It was not necessary to decide all those detailed points 
now. 

Dr. Sze said that, so far as the landing was concerned, the Chinese 
delegates could not go beyond instructions. In view, however, 
of the fact that Japan would recognize the rights of China in regard 
to the cables, and also the rights of the two companies having con- 
tracts Avith China, the Chinese delegates were prepared to agree to 
the Japanese proposal to have the question discussed in Peking. 
When the Chinese delegates agreed to it. they did not thereby com- 
promise the Chinese position: they did not mean that the Chinese 
delegates had agreed to the points raised by Baron Shidehara. 

Baron Shidehara presented his formula, as follows, saying that 
the wording might be improved : 

" The Japanese Government renounces all its rights, title, and 
privileges concerning the submarine cables between Tsingtao and 
Chefoo, and between Tsingtao and Shanghai, formerly owned and 
operated by Germany. 



299 

" It is understood that the Chinese Government shall, as soon as 
j)0ssible, establish a Chefoo-Tsingtao-Shano:hai service and open it 
for the public. 

" The question of landing and operation at Tsingtao of the exist- 
ing Tsingtao-Sasebo cable shall form a subject of separate arrange- 
ment among the parties interested, including the Great Northern 
Co., and the Eastern Extension Co." 

Dr. Sze wondered whether the bringing into Tsingtao of the cable 
between Chefoo and Shanghai had not been made, in the text, a sort 
of condition for the transfer of the cables. 

Baron Shidehara said that that arrangement was not only in tlie 
interest of Japan, but in China's own interest, and also for the bene- 
fit of all. China had already- had that plan in mind. 

Dr. Sze said that he would object to having that point put in 
the text expressl3^ The Chinese delegates had no authoritj^ to say 
how the cable should run. It might be that the Chinese Government 
had already decided to have the line run directly between Shanghai 
and Chefoo or land at Tsingtao. He and his colleagues were not 
in a position to say either Avay. In order to make clear those points 
it would be better to have the question settled at Peking. As to the 
landing of the Sasebo line at Tsingtao, China, first of all, could not, 
in the face of the existing contracts with the cable companies, agree to 
the Japanese proposal without their knowledge. Secondly, he did 
not know what the views of Peking were. Therefore the Chinese 
delegates would have China reserve the right to refuse or grant 
that right to Japan. He added that the Chinese delegates had 
drafted a formula something on the line suggested by Baron Shi- 
dehara. 

Dr. Koo said that he had drafted a plan, which was practically 
the same as that presented by Baron Shidehara. the only difference 
being in the form. The draft was as follows : 

'' Japan relinquishes in favor of China her claim to the former 
German State submarine cables from Tsingtao to Shanghai and 
from Tsingtao to Chefoo, with all the right, privileges, and prop- 
erties attaching thereto, Avith the exception of those portions of the 
two said cables which have been utilized bj^ the Japanese Govern- 
ment for the building of the submarine cables from Tsingtao to 
Sasebo. 

" The question concerning the landing privilege of the said Tsing- 
tao-Sasebo cable shall be arranged by Chinese and Japanese com- 
missions, it being understood that China reserves to herself the 
right to give or withhold consent, in view of the existing contracts 
to Avhich she is a party." 

Baron Shidehara said that he appreciated the difficulty of the 
Cliinese delegates in committing themselves in regard to the Shang- 
hai-Tsingtao-Chefoo service, but it was a question to which the 
Chinese Government would not in principle have any objection. 
He wished that the Chinese delegates would at least be able to rec- 
ommend to the Chinese Government to accept the Japanese proposal. 

Dr. Sze said that on account of the jealousy among the different 
departments as to their jurisdiction, while they were ready to inform 
Peking of the Japanese wish, they had better not express any views 
of their own. They themselves, moreover, had no idea as to the 
necessity of the suggested arrangement. 



300 

Baron Shidehara said that he would like to propose a few modi- 
fications to the Chinese draft. The idea was to bring the two para- 
graphs into one, making the whole as simple as possible. The for- 
mula read as follows : 

^' Japan relinquishes in favor of China all her rights, title, and 
privileges concerning the former German submarine cables between 
Tsingtao and Cliefoo and between Tsingtao and Shanghai, with the 
exception of those portions of the said two cables which have been 
utilized by the Japanese Government for the laying of a cable be- 
tween Tsingtao and Sasebo; it being understood that the question 
relating to the landing and operation at Tsingtao of the said Tsing- 
tao-Sasebo cable shall be arranged by the Chinese and Japanese com- 
missions in consultation with the Great Northern Co. and the East- 
<irn Extension Co." 

Dr. Koo said that while in the first part of the formula reference 
was made to the " rights, title, and privileges," he thought that it 
was unnecessary to raise the legal question again. The important 
thing was the cables themselves. 

Baron Shidehara said that the Chinese delegates recognized Ja- 
pan's claim in their formula. 

Dr. Koo said that '' claim " was not the rights or title themselves. 
It represented an ex parte view. It was a neutral term, if he might 
use such a word. 

Baron Shidehara thereupon suggested the deletion of "her" pre- 
<3eding " rights, title, etc." 

Dr. Koo said that Japan could not renounce something which she 
did not possess. 

Baron Shidehara suggested the formula : 

"Japan shall hand over to China the former German submarine 
•cables, etc." 

Dr. Koo wondered whether Baron Shidehara meant to hand over 
those portions left at the bottom of the sea. 

Mr. Hanihara said that the suggested formula would be followed 
by the wording appearing in the Chinese formula, " with all the 
rights, title, and properties attaching thereto, etc." 

Dr. Koo said that he supposed the Japanese delegates shared the 
Chinese desire to avoid legal implications. He would therefore sug- 
gest the following : 

"All rights, titles, and privileges concerning the former German 
cables, etc., are hereby declared to be vested in the Chinese Govern- 
ment, etc." 

Baron Shidehara suggested the form : 

" Japan shall transfer the former German cables, etc." 

Dr. Koo said that that would necessitate the act of transfer. He 
wondered whether the revised Chinese formula would not be accep- 
table. 

Baron Shidehara suggested a few changes m the Chinese formula, 

reading: . 

" Japan declares that all the rights, titles, and privileges, etc., are 
vested in China, with the.exception of those portions of the said two 
cables which have been utilized by the Japanese Government for the 
laying of a cable between Tsingtao and Sasebo ; it being understood 
that the question relating to the landing and operation at Tsingtao 
of the said Tsingtao-Sasebo cable shall be arranged by the Chinese 



301 

and Japanese commissions in consultation with the Great Northern 
Co. and the Eastern Extension Co." 

Dr. Koo thought that it would be best to leave out the mention of 
the two companies, over which they had no control. He asked 
whether the Japanese delegates had any objection to inserting the 
reservation Dr. Sze had suggested, which simply described the ex- 
isting situation. 

Baron Shidehara said that if Dr. Koo meant the passage in the 
Chinese draft reading, " It being understood China reserves to her- 
self the right to give or withhold such consent, etc.," he thought that 
that point went without saying. 

Dr. Koo said in that case the Chinese delegates were ready to omit 
that passage. He then proposed the substitution of the phrase, " sub- 
ject to existing contracts to which China is a party," for the con- 
cluding phrase of Baron Shidehara's draft, reading " in consultation 
with the Great Northern Co., etc" 

Baron Shidehara agreed. 

Dr. Koo considered that the draft was equally acceptable to the 
Chinese delegates. 

The agreement read as follows : 

" Japan declares that all the rights, title, and privileges concerning 
the former German submarine cables between Tsingtao and Chefoo, 
and between Tsingtao and Shanghai, are vested in China, with the 
exception of those portions of the said two cables which have been 
utilized by the Japanese Government for the laying of a cable be- 
tween Tsingtao and Sasebo; it being understood that the question 
relating to the landing and operation at Tsingtao of the said 
Tsingtao-Sasebo cable shall be arranged by the Chinese and Japanese 
commissions, subject to the terms of the existing contracts to which 
China is a party." 

QUESTION OF THE WIRELESS STATIONS. 

Baron Shidehara said that at present there was only one wireless 
station at Tsingtao. Exactly speaking, there had been three stations 
at Tsingtao, but the Japanese authorities had withdrawn two of 
them. Japan had no objection to handing it over to China for a 
suitable compensation. The actual value of the wireless properties 
must be ascertained, for which it was proposed that proper compensa- 
tion should be made by China. 

Dr. Koo asked whether it was the high-power station at Ta-Shih- 
Chang. 

Baron Shidehara said that the station was on a hill in Tsingtao 
and had a power of 12 kilowatts. 

Dr. Koo said that it was therefore within the leased territory. He 
also understood that there was another station at Tsinanfu. 

Baron Shidehara answered in the affirmative and said that that 
station had also to be handed over to China. It was not, of course, 
possible to arrange details of the transfer. But there was one point 
to which he hoped the Chinese delegates would agree. It was hoped 
that the wireless stations at Tsingtao and Tsinanfu might be opened 
for public use and that Japanese alphabet messages would be accepted 
at those stations. 

93042—22 20 



302 

Dr. Sze said that it Avas quite a technical question and that the 
Chinese dele^jates could not touch technical details. 

Baron Shidehara said that the question was similar to that Avhich 
had been discussed between the two delectations in connection with the 
Tsingtao customs. 

Dr. Sze said that he remembered a similar (juestion being raised in 
Manchuria. He and his colleagues were not in a position to discuss 
such a technical matter. Moreover, he understood that there was a 
great deal of technical difficulty in allowing Japanese Kana messages. 

Baron Shidehara said that there could not be much difficult_y. The 
proi:>osal was made with a view to the convenience of the large number 
of Japanese in Tsingtao. 

Dr. Sze said that from the point of view of the efficiency of the 
service, he thought it better to leave out the question. 

Baron Shidehara said that the suggested arrangement w^ould pro- 
mote the efficiency of the service. 

Dr. Sze said that he understood it was the policy of the Chinese 
Government to attain uniformity of communications as much as pos- 
sible. If an exception in favor of the Japanese alphabet were to be 
made, he was afraid that even the Turkish might be coming forward 
with a similar demand. 

Baron Shidehara said that the actual conditions prevailing in the 
locality must be taken into consideration. The Chinese delegates 
had practically agreed to the principle involved in the present Jap- 
anese proposal in the course of the discussions on the customs of 
Tsingtao. It was. of course, a technical matter and perhaps it would 
be useful for China to employ Japanese operators at these stations, 
at least for tlie time being. He understood the Chinese wireless 
operators at Shanghai were being trained in dealing with the Jap- 
anese alphabet. 

Dr. Sze said that he preferred not to touch such a technical matter. 

Baron Shidehara suggested leaving the matter for later discus- 
sion. 

Dr. Sze asked if there were no otlier receiving stations in any part 
of Shantung. 

Baron Shidehara answered in the negative. 

Dr. Sze again asked what the capacity of the Tsinanfu station was. 

Baron Shidehara said that its capacity was 70 kilowatts, and that 
technically it could not be called a high-power station. He w^ould 
suggest the following formula in regard to the two stations : 

'• The wireless stations at Tsingtao and Tsinanfu shall be trans- 
ferred to Cliina on proper terms and for suitable compensation, 
which shail be arranged between Japanese and Chinese commis- 
sions."' 

Dr. Sze said that when Baron Shidehara said " suitable compensa- 
tion" that seemed to mean the terms. He wondered if by "terms" 
was not meant " details." 

Baron Shidehara wondered if Dr. Sze meant to suggest striking 
out " suitable compensation." 

Dr. Sze said that the word " terms " seemed to him really to mean 
" details " of the transfer. 

Baron Shidehara wondered what would be Dr. Sze's practical sug- 
gestion on that point. 

Dr. Sze said that he was asking Dr. Koo to draft on the subject. 



303 

Dr. Koo said that he thought a very simple form could be adopted 
on the present subject. He would suggest the following: 

" The Japanese wireless stations at Tsingtao and Tsinanfu shall be 
transferred, within so many months after the coming into force of 
the present agreement, to China for a suitable compensation for 
the value of the stations. The details of such transfer and com- 
pensation shall be arranged by Japanese and Chinese commissions." 

Baron Shidehara said that he hoped that the Chinese delegates 
would seriously consider the matter of Kana messages. He said that 
it would not affect the efficiency of the service in the least, but would 
greatly make for the benefit of the Japanese residing in the locality. 

Dr. Sze said that his hesitation in agreeing to the arrangement was 
due to his lack of knowledge on a matter so technical. 

Baron Shidehara said that he was afraid the word " details " in 
Dr. Koo's formula could' hardly be construed as including the ques- 
tion of the Kana messages. A^gain, it was difficult to say anything 
about the period of the transfer, because, having no technical knowl- 
edge, he could not say how many months would be required. 

Dr. Sze thought that the transfer of wireless stations was such a 
simple matter that it would not take long. 

Baron Shidehara said that he had just been told by an expert ad- 
viser that these Japanese wireless stations were actually for military 
use. so the period of their transfer would have to be the same as that 
of the withdrawal of the Japanese troops. 

Dr Koo suggested the wording " upon withdrawal of the Japanese 
troops." 

Baron Shidehara asked how the following formula would be re- 
ceived by the Chinese delegates: 

" The Japanese wireless stations at Tsinanfu and Tsingtao shall, 
upon the withdrawal of the Japanese troops, be transferred to China 
upon terms which shall be arranged by Japanese and Chinese com- 
missions." 

Dr. Koo thought the matter was comparatively a very simple one. 
There were only two questions involved — compensation and transfer. 
I f it Avere wished to introduce the matter of Kana, the Chinese dele- 
gates were willing that the Japanese delegates should make reserva- 
tion for raising that question when the commissions met to discuss 
details. 

Baron Shidehara read Dr. Koo's formula again and said that it 
v^'as acceptable to the Japanese delegates. He desired, at the same 
time, to have it recorded in the minutes that when the details were 
discussed by the Japanese and Chinese commissions, Japan would 
have to bring up the question of Kana messages. There was no techni- 
cal knoAvledge available here, but when the experts of the two coun- 
tries met they could perhaps arrange the matter. 

Dr. Koo said tliat what little knoAvledge the Chinese delegates had 
acquired of that language through the present conversations did not 
seem to incline them to see any prospect of the matter being accepted 
by China. The question being a technical one, it Avould perhaps be 
best to leaA^e it where it stood. The Japanese delegates desired to 
have their statement on that point recorded in the minutes. The 
Chinese delegates had no objection to that. 



304 

Baron Shidelmra said that when the details of the transfer came 
up for adjustment, Japan Avould have to raise that question. The 
Japanese position in regard to the matter must not be prejudiced by 
the present agreement. It must not be said that his delegation had 
abandoned their point. 

Dr. 8ze said that the whole difficulty with the Chinese delegates 
was that they were not in a position to say that when that question 
Avas raised b}' Japan it would be accepted Ly the Chinese commission. 

Baron Shidehara said he saw the Chinese position. 

Dr. Koo asked whether the proposed draft might be considered 
as accepted. 

Baron Shidehara ansAvered in the affirmatiA^e. He added, referring 
to the matter of Kana messages, that he understood Chinese Avireless 
operators in Shanghai AA^ere uoaa^ being trained in Japanese Kana. 

Dr. Koo said that there AA^ere a fcAA- more small questions left unde- 
cided AA'hich Avould probably be disposed of easily. He thought they 
should be taken up as soon as possible, and suggested meeting early 
the next morning. 

Baron Shidehara said that there being so many committee meet- 
ings to-morroAA', he hardly thought it possible to meet, eA'en for a 
short time. 

The meeting adjourned at 6.30 o'clock until 10 o'clock a. m. Satur- 
day. 

The Japanese Delegation, January 19^ 1922. 

SJC-80.] 

January 19, 1922. 
[For the press.] 

Issued hy the Chinese and Japanese delegations. 

The Chinese and Japanese delegates had their thirtieth meeting at 
4 o'clock this afternoon, January 19, 1922, in the governing board 
room of the Pan American Union Building. 

Understandings have been reached on the questions of the former 
German cables between Tsingtao and Chefoo and between Tsingtao 
and Shanghai as well as of the wireless stations at Tsinanfu and 
Tsingtao. 

This meeting adjourned at 6.80 o'clock until 11 o'clock Saturday 
mornins:. 



THIRTY-FIRST MEETING. 



The thirty-first meeting, held in the governing board room, the 
Pan American Union Building, Washington, D, C, at 3.30 o'clock 
in the afternoon of Monday, January 23, 1922. 



PRESENT. 



China.— Dt. Sao-Ke Alfred Sze, Dr. V. K. Wellington Koo, Dr. 
Chung Hui Wang. Secretaries : Mr. T. C. Yen, Mr. T. F. Hsu, Mr. 
C. H. Zee, Mr. Chuan Chao, Mr. T. H. Koo. 



305 

Japan. — Baron K. Shidehara, Mr. M. Hanihara, Mr. K. Debuchi. 
Secretaries: Mr. S. Sabiiri, Mr. E. Kimura, Mr. H. Saito, Mr. T. 
Shiratori. 

Also present as observers : 

The United States of America. — Mr. John Van A. MacMurray, 
Mr. Edward Bell. 

The British Empire.— ^ir. M. W. Lampson, M. V. O. ; Mr. F. Ash- 
ton-Gwatkin. 

SALT FIELD. 

Mr. Hanihara said that if agreeable to the Chinese delegates, the 
salt question would be taken up to-day. If he remembered correctlj^, 
when the conferees had ended their conversation on the salt ques- 
tion, the Chinese delegates had said that they wanted to take over 
the salt industry in the coast district of Kiaochow for fair compensa- 
tion, and with permission to export salt to Japan. The Japanese 
delegates ha;d promised their Chinese friends to submit the Chinese 
wishes for the consideration of the Japanese Government. Instruc- 
tions had recently been received to the effect that the Japanese Gov- 
ernment desired to have the salt interests retained in the Japanese 
hands, and hoped' that it would not be impossible for the Chinese 
Government to reconsider their position. The Japanese delegates 
appreciated the Chinese desire to include that district in the univer- 
sal monopoly system of China. In order to harmonize the Japanese 
and Chinese points of view, a rough draft had been drawn up which 
he now submitted to the consideration of the Chinese delegates. He 
hoped they could agree to the formula, which read as follows: 

" The Japanese nationals who are actually engaged in the salt 
industry in the coast district of Kiaochow shall be permitted to con- 
tinue in the exercise of such industry, subject to the right of China 
to purchase the industry upon terms to be arranged between the 
Japanese and Chinese commissions. 

" Exportation of a quantity of the salt produced in said district 
shall also be permitted, whether or not China shall have purchased 
the industry under the foregoing provisions. The quantity and terms 
of such exportation shall be arranged between the two commissions. 

" The question of the duty or royalty to be imposed upon the salt 
industry carried on by the Japanese nationals shall be made the sub- 
ject of a separate arrangement." 

He added that the Chinese delegates would observe that the whole 
Japanese idea was that inasmuch as Japan was going to return the 
leased territory of Kiaochow to China she would recover the right 
to give the license for salt industry. Japan only desired to retain 
such rights as had already been acquired by the Japanese nationals. 
Japan did not desire to ask for anything hereafter. 

Dr. Sze said that while waiting for the Japanese draft to be type- 
written he would like to say a few Avorcls. The Chinese position in 
this matter was very clear, whereas the terms of the draft, as he 
had understood, were rather too vague. They appeared to be con- 
trary to the Chinese principle that Shantung Province should be 
restored with a clear title. He was afraid that it might be a waste 
of time to discuss the draft, if his understanding of it was correct. 

Mr. Hanihara said that the question was not one of title at all, but 
simply one of vested rights. 



306 

Dr. Sze said that the Chinese position being very clear, he wanted 
a formiihi in such definite terms that any man in the street could 
understand it. 

Baron Shidehara asked whether it was the Chinese intention now 
to define the precise terms ol' the purchase of the salt industry. 

Dr. Sze said that if IMr. Hanihara meant the vested rights he 
could have used some other terms. If otherwise, all discussion would 
mean nothing. 

Baron Shidehara said that Mr. Hanihara had just suggested that 
China should, of course, have the liberty to repurchase the rights, 
but pending the purchase by the Chinese of those interests the Japa- 
nese nationals should be permitted to carry on their occupation. 

Dr. Sze said that a man in the street who might read the Japanese 
formula Avould think that the Japanese were going to stay there 
permanently. The terms were too vague. 

Baron Shidehara wondered whether Dr. Sze wanted to arrange 
precise terms of the transfer. 

Dr. Sze replied that he wanted a formula not in such vague terms. 

Baron Shidehara said that he had not been at the meeting when 
the question had last been discussed. He inquired whether any prin- 
ciple had been suggested by the Chinese delegates to regulate this 
matter. 

Dr. Sze said that the Chinese intention was to purchase the indus- 
try forthwith. He wanted a clear-cut arrangement, without any 
line attached to it. He thought he had better state very candidly 
that the impression left cm his mind by listening to the Japanese 
formula was not very favorable. 

Mr. Mac^NIurray suggested that it might be better to wait for the 
Japanese draft to be typewritten. He did not himself know wha,t 
the exact terms were. 

Dr. Sze said that he could not conscientiously present to his people 
anything which was vague and not clear-cut. 

Mr. Lampson counseled that it would be better to wait for the 
draft. 

Mr. Hanihara said that he would try to make the meaning of the 
draft as clear as possible when it came in. 

(The typewritten draft came in at this moment.) 

Dr. Sze said that after the examination of the draft he would once 
more say that the instructions from the Chinese Government were 
that the purchase should be made forthwith. The Japanese draft, 
therefore, could not be accepted. He must have an arrangement 
which would be plain to any man in the street. The arrangement on 
the principle should now be arrived at, the details to be worked out 
locally. What the Chinese delegates wanted was to clearly state 
that the purchase would be completed within a certain period, and 
if there were difficulties in coming to an arrangement locally, the 
matter should be submitted to arbitration by impartial people. 

Mr. Hanihara said that he would explain the Japanese position 
as embodied in the present draft. As he had stated when the ques- 
tion first came up, the salt industry w^as deemed to be of great im- 
portance to Japan, not only because Japanese nationals were actually 
engaged in the industry but because Japan wanted to have the salt 
produced in the district supplied to herself. The Chinese delegates 



307 

had said that China had a monopoly system, in which it was desired 
to have the district incorporated. It was a very proper desire on the 
Chinese part. The Japanese delegates had stated that the reason 
for the Japanese proposal was that the Japanese nationals desired 
to retain their vested interests. So far as his information went, the 
salt industry of the district had, in the past, been outside of the 
monopoly system. In 1916, when the Chinese department for the 
salt gabelle administration had tried to incorporate the salt industry 
of that part of the country in the general monopoly system, it could 
not accomplish that object on account of the opposition of the people 
of the coast district of Shantung, and the district accordingly re- 
mained outside the system as before. In view of that fact, the Japa- 
nese delegates had thought that it was not unreasonable to ask the 
Chinese delegates to consider the Japanese proposition. He was not 
saying this in a spirit of criticism, but in view of what had actually 
happened in the past it did not seem to him an altogether groundless 
apprehension. The point Avas that if the Chinese Government were 
to take over the industry, he wondered if there might not be trouble 
again. 

Dr. Sze said that China should take care of that herself. Tliat 
was a Chinese question entirely. 

Mr. Hanihara said that that was quite so, but it was of the first 
importance to Japan that the industry which was now in the hands 
of the Japanese nationals should continue undisturbed. It was of 
v^ital interest to Japan that the Shantung salt should be regularly 
exported to that country. 

Baron Shidehara said that so far as he could see there was nothing 
in the draft which would prevent the Chinese Government to repur- 
chase the salt industry outright. 

Dr. Sze said that if that was the case, he wondered why the 
Japanese delegates w^ould not have that point unmistakably set clown 
in the draft. China would, of course, like to meet the Japanese 
wishes as to the exportation. It was dangerous to adopt a vagaie 
phraseology. 

Baron Shidehara stated that the question was one in which no 
political meaning was mixed up. 

Dr. Sze said that that was a political question, involving as it did, 
the question of Government monopoly. 

Mr. MacMurray said that if he remembered rightly, the Chinese 
proposition had not at all been incompatible Math the present formula. 
He thought the propositions of the two delegations could be har- 
monized. 

Dr. Sze said that he wanted a clear-cut formula which would be 
easily understood by any man in the street. There should not be 
any apprehension that the matter might permanently drag on. 

Mr. Lampson said that he saw nothing in the Japanese draft 
to prevent its harmonizing itself with the Chinese decision. The 
underlying principle was the same. 

Dr. Sze said thd,t Mr. Hanihara had spoken about retaining finan- 
cial interests. 

Mr. Hanihara said that that was not the case. The question was 
one of the interests of the Japanese nationals. What the Japanese 
Government was interested in was nothing more nor less than gettin;^ 
the supply of the salt. Nothing more was desired in the future. 



308 

Dr. Sze asked whether what Mr. Hanihara had referred to as the 
desire of the Japanese Government was not the financial interests. 

Mr. Hanihara said that that had not been his intention. The 
Chinese Government was to recover the power of issuing license here- 
after. Japan was not going to request of China anything in the 
future. The only thing she desired was that vested rights should 
be respected. 

Dr. Sze asked Mr. Chao to read the minutes he had been taking. 

Mr. Chao said that his notes ran, roughly, as follows : 

" Mr. Hanihara said that if he remembered correctly, as China 
would like to take over the salt industry with the understanding 
that permission would be given to export salt to Japan, the Japanese 
delegates had submitted that proposition to the Japanese Govern- 
ment. Now, the Japanese Government had replied it desired that 
the Japanese nationals should retain interests there * * *." 

Dr. Sze said that he had been referring to these words of Mr. 
Hanihara. 

Mr. Hanihara said that M'hat he had said was that the Japanese 
nationals should continue in their industr;\^ 

Dr. Sze said that that was what the Chinese delegates objected to. 

Mr. Hanihara said that the Japanese delegates did not object to 
China jDurchasing the industry. What he and his colleagues were 
concerned about was that there should be no interruption in the salt 
business noAv being conducted by the Japanese nationals. If China 
wanted to buy out the business, that was China's own affair. As 
Baron Shidehara had stated, Japan attached no political importance 
to the subject. 

Baron Shidehara asked whether the Chinese delegates had any 
counter project. 

Dr. Sze said that the Chinese delegates would present their formula 
very soon. He was glad to have ascertained the point of view of the 
Japanese delegates on the point. The Chinese intention was that 
Shantung should be restored to China with a clear title, with no 
lines attached to it. There should be no misunderstanding anywhere. 
If there had been any irritation at all in regard to the question, it 
should now be removed once for all. He should be very sorry if the 
conferees should not be able to do so, after so many meetings. 

Mr. Hanihara said that he had no desire to enter into an argument. 
He had, however, to point out that Japan had interest in the salt 
industry to this extent, that that industry now in the hands of the 
Japanese nationals should not be disturbed or obstructed. Until 
Japan had gone there and begun to engage in the industry on a 
large scale, there had not been much of an industry, to speak of, 
as a source of supply to Japan. 

Dr. Sze said that the danger was there. If the industry was larger 
there was greater danger of smuggling. As to the Japanese desire 
to have the supply of salt, the Chinese delegates were ready to meet 
it. They had been asking the Japanese delegates more than once to 
furnish information as to the amount required by Japan. 

Mr. Hanihara said that Japan had no desire to supply salt to the 
interior of China, in the face of the monopoly system obtaining in 
that country. The Japanese Government would be more than willing 
to cooperate with the Chinese Government to stop any illegal pro- 
cedure. 



309 

Dr. Koo said that he thought there was an agreement on the ques- 
tion of principle, the apparent difficulty with the Japanese draft 
being due to the great scale on which it had been made. He there- 
fore wished to propose another draft which largely followed the 
Japanese idea but which was in simpler language. 

" Whereas the salt industry is a Government monopoly in China, 
it is agreed that the establishments of Japanese nationals along the 
coast of Kiaochow Bay which are actually engaged in the said indus- 
try are to be purchased by the Chinese Government on payment of 
their appraised value, and that exportation to Japan of a quantity 
of salt produced by the said establisliments is to be permitted on fair 
terms. Arrangements for the above purposes, including the trans- 
fer of said establishments to the Chinese Government, shall be com- 
pleted by the Chinese and Japanese commissions within 

months from the date of this agreement. In case the two commis- 
sions can not agree on any point, it shall be referred to arbitration." 

He thought that his draft certainly expressed the Chinese idea of 
the settlement of the question more clearly. He ventured to hope 
that it did not depart too far from the Japanese point of view. 

Baron Sliidehara wondered what Dr. Koo j^recisely meant by the 
word " establishments." 

Dr. Koo said he had thought the phrase " salt industry " more or 
less vague. According to the Chinese information there were 17 
Japanese establishments in the salt industry along the Kiaochow 
Bay. 

Baron Shidehara asked if Dr. Koo used the word more in the 
sense of companies or firms, and he wondered if it was his idea to 
purchase those companies. 

Dr. Koo said he understood that Japanese were carrying on the 
salt industry under the name of company or firm. 

Baron Shidehara asked what the object of the purchase was. 

Dr. Koo inquired if there were companies which were engaged in 
other business as well as in the salt industry. 

Baron Shidehara wondered how a company could be bought. 

Dr. Koo said that it was the business which was to be bought. The 
idea was that after the purchase had been completed there would be 
no Japanese nationals engaged in the salt business. He should be 
happy if Baron Shidehara could suggest a better word, for he was 
not himself satisfied with the term " establishment." 

Mr. MacMurray suggested the word " works." 

Baron Shidehara wondered if the word " interests " could not be 
used. 

Dr. Koo asked if Baron Shidehara's meaning was that when the 
salt business had been bought out the company might go into some 
other business. 

Baron Shidehara said he had no such deep meaning. 

Dr. Koo said that the term " establishments " was intended to 
cover all phases of the business, such as buildings, machinery, etc. 

Baron Shidehara thought the word " interests " might be the cor- 
rect term to use. If the interests of the Japanese nationals in the 
salt industry on the Kiaochow Bay were purchased by China, there 
Avould be no more Japanese nationals engaged in the industry. 

Dr. Koo wondered what that word covered. He wasn't clear about 
the scope to be covered bv that word. 



310 

Baron Sliidehaia thouujht it implied all equipment and also the 
rio-ht to exercise that industry. He thoii<^ht the word was broader 
in meaninir and covered evervthino-. If China bou<>:ht out the in- 
terests, there would be nothin<; left. If the word " interests " were 
to be used, the phrase " appraised value " ou<>ht to be " compensation." 
" Value *' was all right for property, but not for ri«2;hts or interests. 
He would, therefore, su<2;gest modifyino- the Chinese draft as follows: 

" It is a<>Teed that the interests of the Japanese nationals in the salt 
industry along the Kiaochow Bay are to be purchased by the Chinese 
Government on payment of fair compensation, etc." 

He was not sure if the word " establishments " could cover the 
cases of companies and private individuals as well as organized com- 
panies. He understood there were Japanese private individuals en- 
gaged in the salt industry. It would, therefore, seem better to say 
Japanese nationals. 

Dr. Koo asked if Baron Shidehara proposed to change that word 
onW in the first part of the Chinese draft. 

Baron Shidehara said that he would have the same word in the 
latter part of the first sentence also changed and made " industry." 
The meaning was that when China bought the "establishments" 
the export of salt to Japan would l)e rendered impossible according 
to the original Cliinese wording. 

Dr. Koo said that the idea was, of course, that when the estab- 
lishments were bought out China would continue the industr3^ 

Baron Shidehara said he would have the word " industry " in the 
second paragraph changed to " int>erests." He also thought that the 
reference in that paragraph to arbitration was clumsy. He was 
afraid that such an arrangement might take months. He won- 
dered if there might not be some better arrangement for a speedy 
solution. 

Dr. Koo said that what was meant was commercial arbitration, 
which was very often resorted to in China. 

Baron Shidehara said that the commissions were going to be rep- 
resentatives of the two Governments and not of business interests. 
If these Government representatives could not agree on the matter 
and it had to be referred to arbitration it might take years. 

Dr. Koo said that it was merely a commercial arbitration. He 
was, however, confident that when the commissioners met they would 
be able to agree. The provision was one only of usual precaution. 
He hoped there might be no serious occasion for resorting to the 
provision. 

Baron Shidehara said that if such a provision was made the result 
Avould be to retard rather than expedite the matter. He did not 
know what the Chinese delegates had in mind, but if an ordinary 
arbitration were to be utilized, it would take a long time. 

Dr. Sze hoped there might be no occasion to resort to such a means. 

Baron Shidehara asked if the Chinese delegates were not going to 
fix the precise period of time in which the transfer of the industry 
w^as to be completed. 

Dr. Sze said that the Chinese delegates did not have any laborious 
process in mind when they mentioned arbitration. It was an arbitra- 
tion of a very simple character. 

Baron Shidehara said that if the two Government commissioners 
could not agree and the matter had to be referred to arbitration, the 



311 

result would be rather clumsy. The commissions would have to pre- 
pare compromis and such cowpromis would have to be referred to 
the arbitrary judges, and the process would take a long time. 

Mr. Haniiiara said that the matter ought to be left to the good 
faith of the two Governments ; neither side expected any difficulty. 
There would certainh'' be an arrangement to the satisfaction of both 
parties. If he might express his personal sentiment, the proposed 
clause would create an impression as if both Governments did not 
trust each other; as if they expected difficulties to arise. 

Dr. Sze said he understood the Japanese press was against the re- 
turn of the salt fields. There might be public agitation later on. 
That was why he had raised doubt before when he had understood 
Mr. Hanihara to say that Japan wanted to retain interest in the in- 
dustry. 

Mr. Hanihara said that once the Japanese Government agreed, they 
would carry out the arrangement whatever agitation might arise 
against it. 

Baron Shidehara said that while there might be opposition on the 
part of the Japanese interests, he and his colleagues thought the 
Chinese proposal a fair solution and they were prepared to accept 
the proposed method of solution. There was no solution that would 
satisfy everybody. He read the Chinese draft as modified by him- 
self and omitting the last sentence. 

Dr. Koo askecl if Baron Shidehara had any suggestion to make as 
to the last sentence. 

Baron Shidehara said that he would rather eliminate it altogether. 
He thought that the' period of time for the transfer of the industry 
would be a fair guaranty for the execution of the agreement. 

Dr. Koo asked if it was the Japanese idea that " Japanese nation- 
als " included companies as well. 

Baron Shidehara answered in the affirmative. 

Dr. Koo asked if there was any objection to saying '' Japanese 
companies and nationals." 

Baron Shidehara agreed. 

Dr. Koo suggested adding " along the said coast " after the word 
" industry " and also changing the word " suitable " to "' reasonable " 
in the modified draft. 

He said that if a reasonably short period of time were fixed for the 
transfer of the industry, the Chinese delegates would be disposed to 
omit reference to arbitration. The main question for the commission 
w^as the question of valuation. It did not require much time. The 
transfer itself was a simple process, so he would suggest one month, 
or in any case not more than two months. He thought that would be 
ample time. 

Baron Shidehara said that it was a question of practicability. Ac- 
cording to the Chinese information, there were IT establishments. 
In each case the amount of money invested would have to be com- 
puted and various necessary evidences Avould have to be examined. 
He was rather afraid that one or two months would certainly be too 
short. There was no idea to delay the transfer, but he doubted if it 
would be practicable for the commissions to complete their work 
within two months. 

Dr. Koo asked what period Baron Shidehara would suggest. 



312 

Baron Shidehara said it was a technical question of which he had 
no knowledge. This period would, of course, have to be fixed before 
the signature of the present agreement, but for the time being he 
would rather leave the period blank. He remembered there were 
other points on which the date remained to be fixed. Perhaps the 
wording used before might be applied in the present case and say 
" within so many months if possible and in any case not later than so 
many months." 

Dr. Koo said that on that understanding and also on the under- 
standing that a reasonably short period was to be fixed, the Chinese 
delegates were prepared to omit the last clause. 

The final agreement read as follows : 

" Whereas the salt industry is a Government monopoly in China, it 
is agreed that the interests of Japanese companies or Japanese nation- 
als Avho are actually engaged in the said industry along the coast of 
Kiaochow Bay are to be purchased by the Chinese Government on 
payment of fair compensation and that exportation to Japan of a 
quantity of salt produced by the said industr}' along the said coast i& 
to be permitted on reasonable terms. Arrangements for the above 
purposes, including the transfer of said interests to the Chinese Gov- 
ernment, shall be completed by the Chinese and Japanese commissions 

as soon as possible and in any case not later than months 

from the date of the coming into force of the present agreement." 

Continuing, Dr. Koo asked if the Japanese delegates had any other 
questions in mind for discussion. 

Baron Shidehara said that thej^ had none and wondered if the 
Chinese delegates had any. 

Dr. Koo said that the Chinese delegates had a few, comparatively 
speaking, minor questions which could be disposed of in a compara- 
tively short period of time. 

Baron Shidehara asked if Dr. Koo could mention them. 

Dr. Koo said that the Chinese delegates had in mind the question 
of certain claims concerning land along the railways. He realized 
that it was not practicable to enter into details. There was also the 
question of certain claims which the Chinese nationals had concerning 
damages suffered. He presumed there would not be much dilERculty 
in coming to an understanding on a general adjustment, such as had 
been made in the negotiations of 1905 in Peking between the two 
Governments. 

Baron Shidehara asked if the question of damages was contained in 
the treaty of 1905. 

Dr. Koo said that it was not in the treaty itself, but in the protocol 
or minutes. 

The meeting adjourned until 3.30 the following day. 

Washington, D. C, January 23, 1922. 

SJC— 31 1 

January 23, 1922. 
[For the press.] 

Issued hy the Chinese and Japanese delegations. 

The thirty-first meeting of the Chinese and Japanese delegates 
relative to Shantung took place in the governing board room of the 



313 

Pan American Union Building at 3.30 this afternoon. The question 
of salt industry was taken up and an agreement was reached. 

The meeting adjourned at 6.30 p. m. until to-morrow afternoon at 
3.30 o'clock. 



THIRTY-SECOND MEETING. 

The thirty-second meeting held in the governing board room, the 
Pan American Union Building, Washington, D. C., at 3.30 o'clock 
in the afternoon, Tuesdaj^, January 24, 1922. 

PRESENT. 

China. — Dr. Sao-Ke Alfred Sze, Dr. V. K. Wellington Koo, Dr. 
Chung Hui Wang. Secretaries : Mr. T. C. Yen, Mr. T. F. Hsii, Mr. 
C. H. Zee, Mr. Chuan Chao, Mr. T. H. Koo. 

Japan. — Baron K. Shidehara, Mr. M. Hanihara, Mr. K. Debuchi. 
Secretaries: Mr. S. Saburi, Mr. E. Kimura, Mr. H. Saito, Mr. T. 
Shiratori. 

Also present as observers : 

The United States of America. — Mr. John Van A. MacMurray, 
Mr. Edward Bell. 

The British Empire.— Mv. M. W. Lampson, M. V. O.; Mr. F. 
Ashton-Gwatkin. 

CLAIMS FOR DAMAGES AND INJURIES IN SHANTUNG PROVINCE. 

Dr. Koo said that at the end of yesterday's meeting he had stated 
that he might try to dispose of two or three minor questions without 
attempting to go into details. One of these questions related to 
the occupation of land belonging to Chinese citizens along the Shan- 
tung Railway. In many cases the owners had been paid, but in a 
number of cases they had not been adequately paid or had not been 
paid at all. Without wishing to take up any of such questions in- 
dividually, leaving them to subsequent local arrangement, he would 
now propose the settlement of the general principle. The same ob- 
servation applied to the claims which the Chinese citizens thought 
they had for injuries and damages to persons or property during 
the period of the Japanese administration. In bringing up this 
question it was not the desire of the Chinese delegates to convey any 
impression that all these claims were well founded. In fact, all of 
them had to be taken up upon their own merits. Some formula, 
however, might be agreed upon which would enable the authorities 
of both countries to deal with the matter in a manner fair, satisfac- 
tory, and equitable to both sides. He believed that it was as much 
the Japanese desire as the Chinese to do everything toward dissi- 
pating the grievances cherished by the Chinese citizens in Shantung. 
They might be real or imaginary, but in the interests of good rela- 
tions between the two countries it might be desirable to agree upon 
the general principle in regard to these claims. With these pre- 
liminary remarks he wished to read to the Japanese delegates the 
Chinese formula : 



314 

"All claims for restitution of land in Shantung belonging to Clii- 
nese citizens but occupied by the Japanese authorities or subjects 
"without satisfactory arrangements and all claims for compensation 
arising from injuries caused in Shantung to the public property of 
China or to the persons and property of Chinese citizens by fJapanese 
authorities or subjects during the period of Japanese occupation 
shall be jointly investigated by a Sino-Japanese commission, and if 
they are found just, the Japanese Government will cause fair repa- 
ration to be made." 

Baron Shidehara said that he presumed that such cases as had 
been referred to by Dr. Koo had alread}^ been filed with the Chinese 
Government. 

Dr. Koo replied that he thought that was the case. 

Baron Shidehara asked whether Dr. Koo could kindly inform the 
Japanese delegates of the number of those cases and the amount in- 
volved in the claims as they had been filed Avith the Chinese Govern- 
ment. 

Dr. Koo said that the number of cases of claims for the restitution 
of land in Shantung was, according to the available information, 11 
along the railway, but the number in the former leased territory of 
Kiaochow was not indicated. 

Baron Shidehara in(iuired whether those cases were claims in re- 
spect of land. 

Dr. Koo replied in the affirmative. He said that claims in other 
parts of Shantung, viz, outside the leased territory and the raihvay 
zone, numbered 30. making 41 cases in all when the 11 cases before 
mentioned were included, and the amount of the claims involved 
stood at $143,000. 

Dr. Koo then (after consulting his secretary) stated that he had 
been mistaken when he had said "' 11 cases "'/ he should have said "11 
d/sfricfs,'^ wliile his statement as to the other 30 eases had been 
correct. 

Baron Shidehara inquired whether that meant that there were 
more cases than 11 in those 11 districts. 

Dr. Koo replied that he hardly thought so. The documents in his 
hand showed that there Avere 14 mows involved in the first district 
and a little over 10 mows in the second distri; t. The land involved 
in those cases was relatiA^ely very small in area. 

Baron Shidehara said that in that case the districts and cases Avere 
corresponding. It appeared that there was one case in each district. 

Dr. Koo said that he was not ready to say so. In the f'rst district 
there were 14 moAvs involved, but that area might belong to 10 
OAvners. As to the number of claims AA-hich had been filed Avith the 
Chinese Government in regard to the injuries to the lives and prop- 
erties of the Chinese citizens, his information Avas that there Avere 
120 cases, including claims in regard to land. The total amount of 
claims in this connection aggregated $.5,680,565 plus one case for 
which the amount claimed Avas 1,000 taels. 

Mr. Hanihara inquired whether the dollar's referred to Avere Mexi- 
can dollars. 

Dr. Koo replied that he thought so. 

Baron Shidehara said that the fact Avas this : So far as the Japa- 
nese delegates had been informed, they Avere not aAvare of one single 



315 

case. in which hmcl or any property of the Chinese authorities oi 
Chinese nationals had been seized or requisitioned without due 
compensation. Therefore, whatever decision might be arrived at 
here, it was evidently impossible for the Japanese delegates to agree 
to any wording which might intimate that the Japanese authorities 
had i^erpetratecl any unlawful act. In regard to the claims of the 
Chinese citizens against Japanese nationals in respect of injuries to 
persons or properties, they were mere matters of dispute between 
private individuals which did not form a fitting subject for the Gov- 
ernment commissions to take up. These claims could very well be 
adjusted in the ordinary way; that was to say, the Chinese local 
authorities could take up the matter with Japanese military authori- 
ties, or, after their withdrawal, with the Japanese consular authori- 
ties. But if it was proved that the Japanese authorities had failed 
to pay i^roper compensation for any property requisitioned during 
the time of occupation, the Japanese Government would be quite 
willing to do justice to the owner. In the first place the Chinese 
draft seemed to suggest that the private claims should also be made 
to the Japanese commission. He wondered whether that was not 
Dr. Koo's idea. 

Dr. Koo replied that that was his idea and that it was for two 
reasons : In the first place, the fact was that in many cases, while 
the land had been occupied by Japanese subjects, it was not known 
^^ hether, coming in the wake of the Japanese expedition, those Japa- 
nese individuals had not been acting on behalf of the Japanese 
authorities. In the second place, most of the cases were more or less 
of the same character, and as the owners involved in the land cases 
were mostly people of limited means it would be easier for them to 
have a general clause under which the cases might be investigated by 
the joint commission rather than for them to go to the Japanese con- 
sulate themselves and have the cases made the subject of litigation. 

Baron Shidehai'a said that he could not imagine how so many 
cases could have occurred outside the railway zone. 

Dr. Koo said that the cases had occurred outside the raihyay zone 
or the leased territory, because the Japanese troops had landed at 
Lungkow, in the northern part of the Province, and then had pro- 
ceeded through the interior. 

Baron Shidehara thought that it was well understood that where 
the landed or other properties had been purchased or leased by 
Japanese under contract or agreement it Avas not the Chinese inten- 
tion to call in question or to modify the terms of those definite indi- 
vidual agreements. 

Dr. Koo said not as a class. It was not intended to go into all 
contracts freely entered into by both parties. 

Baron Shidehara said that in any case the whole question was en- 
tirely novel to the Japanese delegates, involving, as it did, rather 
complicated points. The Chinese delegates had stated that they 
believed that some such formula as the one adopted in the protocol 
of Peking in 1905 might be adopted. The wording used in that 
protocol was entirely different from the one now proposed by the 
Chinese delegates. He wondered whether the Chinese delegates had 
the exact text of the protocol. According to the record which the 
Japanese delegation had the wording appeared to be something like 
this : 



316 

" With regard to Chinese properties of various kinds, public or 
private, which the Japanese subjects have intentionally destroyed or 
have used for purposes other than military, the ^wo Governments 
shall examine each of these cases and due reparation shall be made." 

His translation (from Japanese) might be wrono;, but that ap- 
peared to be the substance of the agreement reached in 1905. He 
■wondered whether Dr. Koo had an English translation. 

Dr. Koo handed to Baron Shidehara the Manchuria section of the 
Treaty Handbook published by the Carnegie Peace Institute. He 
said he did not know how correct the translation Avas. 

Baron Shidehara read article 12 of the protocol, as follows: 

" 12. In regard to any public or private property of China which 
may have been purposely destroyed or used by Japanese subjects 
without am' military necessity, the Governments of the two coun- 
tries shall respectively make investigation and cause fair reparation 
to be made" (p. 81).' 

He said that the Chinese draft appeared to be entirely different 
from this. 

Dr. Koo said that one difference was due to the number of cases 
concerning the occupation of land. The other difference was due to 
the fact that to cases outside the leased territory the plea of military 
necessity did not apply. In the case of the Peking protocol the 
claims referred to cases which had arisen within the zone of actual 
hostilities. 

Baron Shidehara said that the Peking protocol appeared to apply 
to properties of all kinds, real and personal, including land. Then 
the protocol rested upon the principle that acts of war could not be 
made the subject of discussion for reparation. 

Dr. Koo thought that that particular point was not in question in 
the present instance. As he had stated, the cases which had arisen 
in Manchuria had arisen in the field of battle; therefore the ques- 
tion of military necessity had been involved. The same might be 
said in regard to the cases occurring within the leased territory of 
Kiaochow, but it did not apply to the claims outside the area. For 
example, before any hostilities had taken place between the Japanese 
and German troops the Japanese forces landed at Lungkow, at 
some distance from Kiaochow, and the same thing might be said in 
regard to cases arising along the railway zone. The Chinese draft 
had been formulated not with the idea of raising the question whether 
the acts of the Japanese had been lawful or not ; that point had been 
carefully avoided. It only provided for a joint commission, which 
should consider and decide each case on its own merits. If the claims 
were found to be just, they would be remedied, and if unjust and not 
paid for, satisfaction would be felt by the parties concerned that 
their case had at least been passed upon. He added that the observa- 
tion he had just made did not apply to the cases of injury sustained 
by Chinese." 

Baron Shidehara said that, of course, in the case of the Eussian 
war the acts of war took place in a wider area. According to the 
minutes of the Peking negotiations, the Chinese plenipotentiaries had 
filed various claims for remedying of damages sustained by Chinese 
officials and people throughout Manchuria. Then after discussion 
it had been decided to limit the scope of the cases which could be 



317 

made the subject of negotiation. The result had been that the clause 
of the protocol alluded to had been adopted. The meaning; appeared 
to be to exclude those damages which had been due to acts of war. 

Dr. Koo wondered whether he correctly understood Baron Shide- 
hara to think that the Chinese draft included acts of war within its 
scope. 

Baron Shidehara replied that it appeared to be the case ; it seemed 
to imply that reparation should be made for injuries caused by acts 
of war. Suppose at the time of bombardment stray bullets had 
landed on certain houses and damages had been caused by them. It 
seemed as if reparation should be made for such damages according 
to the Chinese draft. 

Dr. Koo said that the extent to which reparation should be made 
for the damages flowing out of acts of war was to be determined by 
the general rules and principles of international law ; that could be 
ascertained without much difficulty. He thought that the phrase in 
the last line but one covered the point raised; he was referring to 
the word "just" in that line. Were a given claim to be adjudged 
not justified by the accepted rules of international law, then the 
Sino-Japanese commission would dismiss it. The word " just " had 
been used advisedly. 

Baron Shidehara inquired whether his understanding was correct 
that there was no intention on China's part to give support to the 
claim against damages caused by acts of war. 

Dr. Koo replied in the negative. By acts of war, however, he 
meant actual hostilities, so that the case just mentioned by Baron 
Shidehara of stray bullets causing damages would be covered by 
international law. 

Baron Shidehara asked whether Dr. Koo meant that the case 
referred to would be included in or excluded from the Chinese draft. 

Dr. Koo said that he thought neither delegation was in a position 
to determine what were the rules of international law. 

Baron Shidehara said that it was not his intention to raise a ques- 
tion of international law. He was merely referring to the precedent 
adopted in the Peking protocol. In thait document damages caused 
by acts of war had been excluded. The properties for which repa- 
ration was provided in that protocol referred only to those which 
had been damaged without any military necessity. The wording 
suggested by Dr. Koo seemed to have much wider scope in view than 
had been the case with the Peking protocol. 

Dr. Koo said that in so far as cases were concerned which involved 
injuries caused actually by hostile operations it was not proposed 
that these should be included in the draft. 

Baron Shidehara pointed out that the Peking protocol expresslj^ 
stated that reparation should be given only in regard to those prop- 
erties which might have been destroyed by Japanese subjects. The 
Chinese draft included injuries caused by Japanese subjects as well 
as Japanese authorities. That was also a point of difference. 

Dr. Koo said that he did not know whether he had made his idea 
clear. In the case of the Kussian war South Manchuria had been 
recognized as the zone of hostilities. In the present case the zone of 
military activities was limited to leased territory. In the Russian 
war there had been no such case as the landing of troops at Lungkow. 
93042—22 21 



318 

The Chinese draft had been drafted to cover just such cases, without 
any reference to the question of legality or illegality of the Japanese 
landing at Lungkow. 

Baron Shidehara observed that in the Eussian war there had also 
been raised a question as to the acts of hostility which had taken 
place west of the River Liao. He remembered China had raised a 
question as to the legality of hostile acts west of the river. As a 
matter of fact, the Russians had been there and the Japanese had had 
to fight them. The case of landing at Lungkow was somewhat 
analogous to that case in the Russian war. 

Dr. Koo said that, if he recalled correctly, the case cited by Baron 
Shidehara had occurred after there had been hostilities east of the 
Liao River. He added that if it would meet the approval of the Jap- 
anese delegates some such qualifying words might perhaps be intro- 
duced after the word " occupation," " except such injuries as have 
been caused as a direct consequence of actual hostilities." 

Baron Shidehara said that he was reluctant to refer again to ques- 
tions already mentioned several times, but Japan had already indi- 
cated readiness to hand orer to China ex-German public properties 
of considerable value without any compensation. If only the case of 
docks and wharves at Tsin^tao were taken, the value was con- 
siderable. If the Japanese Government agreed to hand over those 
properties without any compensation, they might very well say, 
" Why should the question of reparation of the kind now proposed 
by China be taken up ? " In the case of the Russian war there had 
been practically nothing handed over to China. Japan had acquired 
the South Manchuria Railway and the leasehold of Kwantung, the 
Chinese Government having consented to their transfer to Japan, 
In the case of Shantung the situation was entirely different. The 
Chinese people had to consider the difference between the two cases. 

Dr. Koo said that the Chinese delegates had really made the pro- 
posal from a broader point of view than the mere question of repara- 
tion of damages. They felt that it would help to restore the feeling 
of friendship and good neighborliness between the two peoples. As 
the Japanese delegates knew, the Japanese military operations in 
Shantung and the long period of occupation of the Province of 
Kiaochow had exercised the minds of the people of the Province to 
a very large extent. Those who had suffered injury felt it keenly, 
A provision of the kind now proposed would go a long way to dissi- 
pate such feelings. 

Baron Shidehara remarked that he quite appreciated the Chinese 
idea, but that, as a matter of fact, this question had been raised by 
the Chinese Government several times and each time the Japanese 
Government had been obliged to say that the question of war dam- 
ages could not very well be taken up. 

Dr. Koo wondered if it was Baron Shidehara's idea to have war 
damages excluded from the proposal. 

Baron Shidehara answered that the whole question was an en- 
tirely new one, about which the Japanese delegates had no instruc- 
' tions at all. He desired to have more time to study the matter. The 
Chinese delegates had mentioned the Peking protocol the day be- 
fore. Since receiving the Chinese draft he had been comparing it 
with the said protocol. He had, however, as yet come to no definite 



319 

idea how to deal with this question. He would suggest postpone- 
ment until the following day. He hoped his Chinese friends would 
realize the difficult position of the Japenese delegation, who had no 
instructions whatever on the point. If they were to refer the mat- 
ter to Tokyo they certainly would raise the question which he had 
just mentioned. They would say that if Japan were to hand over 
German public properties without compensation, why should the 
question of reparation be taken up again. 

Dr. Koo said that from a broad point of view the Chinese dele- 
gates thought that the Japanese delegates would also be anxious to 
have such a provision, because the amount involved in the claims 
received by the Chinese Government was relatively small com- 
pared to the good effect which would be produced on the sentiment 
of the Chinese people. He hoped that if the Japanese delegates re- 
ferred this question to their Government, the latter would find no 
difficulty in accepting the matter from a broad point of view. 

Earon Shidehara pointed out that the question involved a sum of 
more than $6,000,000. 

Dr. Sze said that it was possible that upon investigation many 
of the claims might prove without foundation. It might, after all, 
be a small fraction of the claims which could be sustained. 

Baron Shidehara said that if commissioners were appointed by 
China and Japan to deal with these claims, all the claimants would 
at once press upon them to get satisfaction, and there must be ex- 
pected quite a local agitation. Hundreds of people might come 
asking this and that. He was afraid there might be local agitation 
of serious proportions. 

Dr. Sze said that if a certain case was taken up and dismissed, 
no similar case would come up again, and there would not be much 
agitation. 

Baron Shidehara said that the people would in any case be un- 
satisfied and there would certainly be agitations. They would attack 
both the Chinese and Japanese authorities through all means, in- 
cluding recourse to the press. They would make trouble in case their 
claims were dismissed. 

Dr. Sze said that only those cases found to be baseless would be 
dismissed. 

Baron Shidehara said that the commission would certainly follow 
an impartial course, but the claimants might not be satisfied with 
the findings of the commission. There was a likelihood of local 
agitation of pretty serious nature arising. It should be remembered 
that there were something like a hundred claimants to handle, which 
would mean an enormous task to the commission. 

Dr. Koo said that the examination and adjudication of claims for 
compensations were more or less frequent procedure in international 
relations. He remembered that after the revolution in China in 
1911 claims involving $32,000,000 and numbering 1,500 cases had 
been adjudged at the mixed court almost inside of nine months. 
The investigation of the claims would in itself go a long way toward 
dissipating any agitation on the part of the people. If no investiga- 
tion or hearing were given to their claims, everyone would think that 
his good case was not properly taken care of. If the joint commis- 
sion was held and hearing was given to the cases, at least those claim- 



320 

ants whose cases were found to be just would be satisfied. Tliere- 
i'ore he thouglit that from the Cliinese point of view at least, and 
further in the interests of the orood relations between Japan and 
China, the step suggested in the Chinese formula would be a sagacious 
one to take. 

Baron Shidehara again suggested postponement until to-morrow, 
and he asked if there were any other matters which the Chinese dele- 
gates had in mind. 

TELEGRAPH LINES. 

Dr. Koo answered that there were a few questions upon which he 
.wished to state the understanding of the Chinese delegates, which he 
hoped would be shared by the Japanese delegation. 

With regard to the telegraph lines along the Shantung Railway, 
the Chinese delegates understood them to be part of the said railway, 
and that they would be handed over along with the railway prop- 
erties. 

Mr. Hanihara said that they would be when the question of the 
railway was settled. 

POST OFFICES. 

Dr. Koo said that as regarded the post offices along the railway, the 
Chinese understanding was that these should be withdrawn at the 
same time as the transfer of the railway if that transfer took place 
before January 1, 1923. If the transfer were to take place later, 
the post offices would nevertheless be withdrawn by January 1, 1923. 

Mr. Hanihara said that it would be so, if the Shantung question 
was settled in time. 

Dr. Koo said that he did not understand how the interpretation 
of the post-office resolution of the Far Eastern Committee could 
make the withdrawal of the post offices in Shantung depend on the 
settlement of the Shantung question. 

Baron Shidehara said that he understood the said resolution re- 
ferred to post offices outside leaseholds. 

Dr. Koo said that he was not certain about that, but he should 
have supposed that the post offices in Shantung * * *. 

Baron Shidehara, interrupting, said that with regard to ptost 
offices within the Kiaochow leased territory, the Shantung question 
must be settled first before they could be withdrawn. Those outside 
the leased territory would, of course, be covered by the general prin- 
ciples adopted by the Far Eastern Committee. 

LIGHT RAILWAYS. 

Dr. Koo said he was glad that the Chinese understanding was 
shared by the Japanese delegates regarding post offices outside the 
leased territory. There was also the question of light railways — 
less than 6 miles in length, all told — which were clearly included in 
the " additions " to the Shantung Railway. 

Baron Shidehara asked if Dr. Koo meant those railways connect- 
ing the main line with the mines. 

Dr. Zoo answered in the affirmative and asked if they were 
to go with the railwaj^ and were to be transferred to China along 
with the main line if an agreement were reached thereupon. 

Baron Shidehara answered in the affirmative. 



321 

FORESTRY. 



Dr. Koo said that there was also ^e question of certain forestry 
interest. He und-.*»d 'he/X^^fnte^s'tf w^rfs^^^^^^^^^ the 

Tinrl in connection with the water supply ot ismgido. 
had in connectio ^^^ ^^^^^^ territory. 

sJc-32.] January 24, 1922. 

[For the press.] 

Issued ly the Jafoimse a-nd Chinese delegatwns. 

The tliirtT-second meeting of the Cliinese and Japanese delegates 

wiTh''regard\o the auestion of Sl-ntung ook P^-^a^ P^ -- 

Tuesday afternoon. Januar^y 24 m the govern^^^^ ^^^ ^^^ 

SLX'Ses^c^fzens-fSntSlpTf ince were taken up and 

THIRTY-THIRD MEETING. 

the afternoon, Thursday, January 26, 1J22. 



PRESENT. 



China -T)v Sao-Ke Alfred Sze, Dr. V K. WeM'"gt°V "°'h™' 
ChutgHui Wang. Secretaries: M...Hawkhng Yen, Mr. T. F. Hsu, 

Mr. C H. Zee, Mr Chuan Chao, Mr. T- H- Koa 
Se^SS^r^^^hutM^. E^^im"r:'H. Saito, Mr. T. 
Shiratori. 

tt°S"il«-Tl-«--M- John Van A. MacMurray, 
^''il%Hfiifn.vire.-n.. M. W. Lampson, M. V. O.; Mr. F. 
Ashton-Gwatkm. 

CLAIMS FOR DAMAGES AND INJURIES. 

^rarJt'^.arlS^tSTira^ai^^^^^^^^^^^ 



322 

the second against Japanese subjects or individuals. In regard to the 
first class of cases, he and his colleagues had examined the actual facts 
and had ascertained that outside the leased territory in the Province 
of Shantung the Japanese authorities had not purchased any lot of 
ground nor were they in occupation or possession of any land except 
the railway property, which was now understood to be handed over 
to China. Therefore, if his information were correct, there seemed 
to be no lot of land to be retained by the Japanese authorities after 
the handing over to China of the railway properties. Within the 
leased territory the Japanese authorities had acquired certain lots of 
ground, but each time through the ordinary process of purchase with 
the free consent of the owners. There had been no requisitioning or 
compulsory sale of any kind. So he could not conceive of any claims 
which could properly be brought up by Chinese citizens or authorities 
against Japanese authorities. With regard to the question of dam- 
ages, as he had stated, the Japanese delegates felt that the Japanese 
Government could not be held responsible for any damages which 
might have been caused by the military operations of Japan in the 
Province of Shantung during the late war. No such responsibility 
had been assumed either by Japan or Russia for the military opera- 
tions during the war of 1904—5 in Manchuria. It therefore seemed 
to him that, so far as the Japanese authorities were concerned, there 
could, as a matter of practice, hardly be just claims either for the 
restitution of land or for the recovery of damages. But if there were 
complaints at all in that respect, the Japanese Government would 
no doubt be quite willing to do justice to the claimants, and the 
Japanese consular authorities would be prepared to take up all those 
claims. 

In the second place, in regard to the question of the claims of 
Chinese citizens against Japanese subjects, it was conceivable that 
there should be certain claims of Chinese citizens for the restitution 
of real property on the ground that such property was in unlawful 
possession of Japanese subjects in Shantung or claims for the recov- 
ery of damages on the ground that unlawful acts had been committed 
by Japanese subjects in Shantung during the time of the Japa- 
nese occupation of the leased territory of Iviaochow. But those were 
ordinary cases of claims of the Chinese against the Japanese, and 
could be very properly clealth with in the ordinary way ; namely, they 
could be brought up before the Japanese consulate for examination 
and adjudication. And he felt sure that the Japanese Government 
would be ready to send communications to the Japanese consular 
authorities to expedite the examination of those questions and their 
legal proceedings and to do full justice to the claims of the Chinese 
citizens. 

So, after all, it appeared to him that there was no special need for, 
or advantage in, organizing a special Sino-Japanese commission, 
in this respect. As a matter of fact, if those questions were brought 
up before the Japanese consular authorities, and if those consular 
authorities and the Chinese authorities should be of the opinion that 
examination of facts could be expedited by the formation of a joint 
commission, that could then be very well arranged. It did not appear 
to be necessary now to arrange that a Smo-Japanese commis- 
sion should be specially organized for that purpose. It was a 
matter of convenience only, and the question could be adjusted 



323 

in the ordinary way without resorting to such special proceedings. 
So far as he understood, no such claims had been brought either to 
the Japanese authorities at Tsingtao or to the Japanese consular 
authorities at Tsinan, but if they were actually brought before those 
authorities, they would be only too glad to take them up. 

Dr. Koo said that whether there were any cases in which land had 
been occupied by the Japanese authorities in Shantung without satis- 
factory compensation * * *, 

Baron Shidehara, interrupting, said that, as he had stated, outside 
the leased territory of Kiaochow no land had been occupied by the 
Japanese authorities except the railway properties, which were to be 
handed over to China. 

Dr. Koo said that he had been going to say, whether or not the 
claims were well founded, it was a question of fact ; it all depended 
upon evidence. The Chinese delegates had records with them, but 
they need not go into details here as to how many of the cases could 
be sustained. The question of facts could be easily ascertained, so 
that the point might be left in abeyance. 

Baron Shidehara said that, so far as the Japanese records showed, 
no land had been occupied by the Japanese authorities except the 
railway properties, which were to be handed over to China. 

Dr. Koo said that one very distinct class of cases was land occu- 
pied by Japanese military authorities for target practice. The 
Chinese record showed that the occupation had been made without 
the consent, and in some cases even against the protest, of the local 
authorities. As regarded the other class of cases in which Japanese 
subjects were involved, he understood that Baron Shidehara was 
under the impression that there actually existed such cases. The 
main point appeared to be to reach a provisional understanding as 
to the means to deal with those two classes of cases. He understood 
that Baron Shidehara preferred that they should be handled by 
the consular authorities, but he (Dr. Koo) wondered how such a 
process would be feasible, considering that, in the first place, the 
cases were scattered over a large area, and, in the second place, the 
number of cases was comparatively large. There were 120 cases 
filed, which would, in the ordinary course of events, occupy a great 
deal of time. He did not know how far the machinery in the Japa- 
nese consular establishment would be adapted to handle such a large 
number of cases. He said this earnestly, because most of those cases 
involved the interests of a large number of people of small means, 
who could not afford to wait long before the settlement was reached. 
It might be more practicable and advisable to have some special ma- 
chinery as he had suggested. In that connection, he would express 
his gratification that so far as the investigation of facts and the 
gathering of evidence were concerned. Baron Shidehara had seen the 
advisability of establishing a Sino- Japanese commission. He (Dr. 
Koo) wondered whether the function of the commission could not 
be extended to the adjustment of those cases definitely. 

Baron Shidehara said that when he had said that it was conceiv- 
able that there should be claims by Chinese citizens against Japanese 
subjects, it had not been his intention to convey any inference as to 
the actual existence of any such claims. With regard to the function 
of that commission, there was one point to be considered : Suppose 
the commission examined each case and gave findings, there was 



324 

nothing which made such findings obligatory upon Japanese subjects. 
They would have no legal effect ; only the findings of the court were 
binding upon Japanese subjects. If Japanese subjects simply de- 
nied the existence of facts there would be no way of proceeding 
any further. The Government could not compel subjects to pay 
damages, except by virtue of judgments rendered by the court. The 
function of such a commission would legally be only administrative, 
and would have no judicial force. Even if the claims by Chinese 
subjects were found just, the Government would not be able to 
compel Japanese subjects to pay for the injuries or restore the prop- 
erties without judgments of court. That was the difficulty. What 
the commission could do would only be to find out exact facts. Even 
if a claim were found to be just, the Japanese Government would 
not be able to undertake to compel the Japanese to pay the damages ; 
it was only through judicial procedure that the claims could be 
enforced. 

Dr. Koo said that Baron Shidehara was referring to the cases in 
which Japanese subjects were-involved. He wondered whether that 
applied to the cases in which the claims were preferred against the 
Japanese authorities. 

Baron Shidehara said that it did not. Only he did not know how 
many of such cases there actually were. Dr. Koo had referred to the 
case of land used for target practice. He wondered if there were 
many more similar cases. In any case, many lots of land had been 
restored to the Chinese, and after the withdrawal of the troops 
there would be no piece of ground occupied. 

Dr. Koo said that for the past few years land had been used in 
several cases without any compensation. It was only just that it 
should be paid for. 

Baron Shidehara said that if that were the case the Japanese Gov- 
ernment would certainly be glad to do justice, although it had no 
information on the subject. 

Dr. Koo asked how Baron Shidehara proposed to modify the 
Chinese draft. 

Baron Shidehara said that he had nothing to offer. He thought 
that there would be no need of any such special provision. 

Dr. Koo said that some provision would be desirable, because the 
two delegations had practically agreed in substance. While the total 
amount involved was a few million dollars, still so many people were 
interested in the matter that some provision would serve a verj^^ 
useful purpose. 

Baron Shidehara said that there was another minor point which 
he might do well to mention. In the Chinese draft reference was 
made to the injuries caused to public properties of China. Now, Dr. 
Koo had explained that by the present proposal it was intended to 
give satisfaction to the claims of local population, with a view to 
allaying their agitation. If so it would not be the Chinese intention 
to press for the payment for damages which might have been caused 
by military operation of Japan during the late war to public proper- 
ties. • \ 

Dr. Koo said that what was intended in the Chinese draft in 
regard to public properties of China was only actual damages done 
to those properties. 



325 

Baron Shidehara said that he understood Dr. Koo's point of view, 
but the meaning of the whole proposal appeared to be to pacify and 
relieve the agitation now being made by the local population. If 
that was the case, public properties could very well be left out of 
consideration. 

Dr. Koo said that if Baron Shidehara could take the Chinese 
draft as it stood, the Chinese delegates were disposed to omit "pub- 
lic properties " to meet the Japanese wishes, with the understanding 
that such public properties as had been taken away would be re- 
stored to China and the question of damages would not be referred 
to. 

Baron Shidehara inquired whether there were many such cases 
of damages alleged to have been caused by the action of the military 
authorities. If so, he would like to know how many there were. 

Dr. Koo said that on the list he had, the number appeared to be 
quite considerable, although it was conceivable that some of those 
cases would, upon investigation, prove not well founded. But that 
was a question of fact. 

Baron Shidehara said that, as he had stated, the Japanese dele- 
gation had no information on the point. If there were any such 
cases, and if they should be brought to the military authorities now 
at Tsingtao, or to the consular authorities at Tsinan, they would 
certainly try to do justice. If there were only half a dozen cases, 
it would not be necessary to have a special commission. The authori- 
ties of the two countries could take up the cases and decide them 
upon their own merits. 

Dr. Koo said that the total number was 120, including the private 
and public cases. 

Baron Shidehara presumed that the number mostly represented 
private cases. 

Dr. Koo said that a good many of them were private cases, but 
quite a few were cases in which Japanese authorities were concerned. 

Baron Shidehara said that the ordinary course to be taken by 
the Chinese Government in the matter would be, in the first place, 
for the Chinese authorities to investigate the cases and then, upon 
prima facie evidence, bring them up before the Japanese authorities, 
whereupon, if necessary, local negotiations would take place. 

Dr. Koo said that that would probably take a long time. If a 
joint commission were established and all the evidences and docu- 
ments were amassed before them, they would sift the evidence and 
would agree to rule out such cases as were not supported by sufficient 
evidence. The whole matter could be arranged in a shorter period 
of time. 

Baron Shidehara said that he quite realized Dr. Koo's idea, but, 
so far as private claims were concerned, the findings of such a com- 
mission would have no binding force upon the private individuals. 
It would be legally impossible for the Japanese Government to 
undertake to compel Japanese subjects to make reparations on the 
strength of such findings. Only through judgments rendered by 
the court could they be enforced. 

Dr. Koo said perhaps they could adopt a separate procedure in 
regard to the cases in which the claims were against Japanese sub- 
jects. The investigtion of facts could be undertaken by the joint 



326 

commission and the finnl adjustment be left to the Japanese and 
Chinese authorities. 

Baron Shideliara said that the trouble was that the result of such 
negotiations would not be binding upon Japanese subjects against 
whom findings might be given. 

Dr. Koo said that the evidences could easilj^ be turned over to 
the proper authorities. In normal cases, investigations of facts 
would take a long time. If the findings of facts were left to con- 
sular authorities, it might tax their time too much. Therefore, in 
order to meet the Japanese point, he was proposing that the adjudi- 
cation should be made by the Japanese and Chinese authorities after 
the evidence and facts had been gathered by the joint commission. 

Baron Shideliara said that he was speaking of the rather technical 
side of the question. The findings of the commission had no legal 
effect. If a Japanese said that he could not be subjected to the rul- 
ings or findings of such commission, what could be done? They 
could not be compelled to pay. 

Dr. Koo said that, as he understood, there were two steps involved. 
The commission would first investigate and report on the question of 
facts, and the next step would be to find the law and pass judgment. 
He understood that Baron Shidehara saw difficulty in the commis- 
sion rendering final judgment in the cases where Japanese subjects 
were involved. He would now suggest that the question of final law- 
suit should be left to the proper Japanese authorities, if that course 
was preferred. That was often clone. When an important case was 
brought before the court it often designated a special commission to 
gather evidence, especially when it could be gathered only on the 
spot, which happened to be far removed from the court. 

Baron Shidehara said that in the ordinary course of affairs such 
would be done by the order of the court. 

Dr. Koo said that in the present case there was nothing to prevent 
the commission being invested with the power to investigate facts. 
Such had frequentl}^ been done. In various cases commissions of in- 
quiry had been appointed. 

Baron Shidehara inquired what the relation between the results 
of the examination by the commission and the judgment of the con- 
sular courts could be. The commission could not itself bring up the 
cases before the court. The claimants themselves had to present 
civil cases before the court. 

Dr. Koo wondered if it was necessary to enter into the details of 
procedure of the consular courts. The matter could be easily ad- 
justed, especially on the part of the Japanese authorities usually so 
well equipped. He thought that if the two delegations could reach 
any understanding as to the general procedure to be followed in the 
investigation of facts and the rendering of decisions, that would be 
all that could be done here, leaving the details to be later worked out 
locally. 

Baron Shidehara asked Dr. Koo to tell him what the exact Chin- 
ese proposal was. There was certainly this difficulty on the Jap- 
anese part, that even if the claims were found to be just by the com- 
mission, the Japanese Government could not undertake to cause 
reparations to be made by Japanese subjects, except where the cases 
were brought before the court through the ordinary judicial pro- 
cedure. 



327 

Dr. Koo thought that they could perhaps easily readjust the draft 
(p. 314) to meet the Japanese difficulty. Taking the draft as 
it stood, they could omit " subjects " in tlie two places where they 
occurred, so that the draft would apply only to the cases involving 
Japanese authorities. And then in the second clause they could use 
the same language, leaving oiit the word " authorities " ; then toward 
the end they could use the phraseology, " and referred to the Chinese 
and Japanese authorities for final adjustment." That would leave 
sufficient latitude for the cases either to be referred to the consular 
court or to any other special tribunal which the Japanese Govern- 
ment might institute and which the two Governments might agree 
upon. 

Baron Shidehara hoped that the Chinese delegates would realize 
the difficulty of the Japanese delegates to agree to any arrangement 
which might intimate that the Japanese authorities in Shantung 
had committed unlawful acts, had requisitioned land without ade- 
quate compensation or had been guilty of acts resulting in injuries 
to Chinese citizens. So far as the Japanese delegation was informed 
there was no such instance. It was of the first importance for him 
and his colleagues to know what were these complaints filed with the 
Chinese Government. If they could have a list of these complaints, 
then perhaps they could find out the most suitable way to deal with 
the question. They might then know whether the provision of a 
special commission would be necessary or not. There seemed to be 
some cases which had never been known to the Japanese authorities. 
If they were brought to their knowledge, the Japanese authorities 
would be quite willing to do justice to the claimants. 

Dr. Koo said that a number of these cases had been brought to the 
attention of the Japanese authorities. There was, for instance, a 
case where the Japanese military authorities had occupied a piece 
of land to use it for target practice. The Chinese local authorities 
had taken up the matter with Lieut. Col. Kishi for adjustment but 
without satisfaction, the result being that finally the treasury of the 
county had advanced money to the claimant. The question was 
still outstanding. There was also a case where a piece of land which 
had originally been set aside for the use of the Japanese consulate 
had been used by a Japanese subject as a site for a billiard room. 
Local authorities had taken up the question with the Japanese consul 
at Tsinan. It could not thus be said that all the cases had not been 
brought up before the Japanese authorities. 

Baron Shidehara said that in any case those claims had not been 
known to the Japanese Government ; that was, neither to the legation 
at Peking nor to the Tokio Government. If local adjustment had 
not been reached upon these cases, the Chinese certainly had a means 
of bringing them before the Japanese Government either through 
the legation at Peking or directly to the foreign ministry at Tokio. 
The Japanese Government would be willing to do justice to the 
individual claimants ; should some of the cases be rather involved in 
nature he had suggested that a Sino- Japanese joint commission might 
be organized to investigate into the exact facts. At any rate a general 
clause for the organization in advance of such a commission would 
seem to be unnecessary. 

Dr. Koo said that he wondered if the real purpose of the Chinese 
proposal had been well understood. It was not the intention of the 



328 

Chinese delegates to call in the question of whether the Japanese 
authorities had acted unlawfully or not. The idea was to find a 
machinery to establish facts one way or the other. He would natu- 
rally suppose that the Japanese government would also be anxious to 
have any claims advanced against them investigated. 

Baron Shidehara said that if claims were preferred against them 
the Japanese Government would at once institute machinery for 
inquiries and might projDerly ask assistance of the Chinese Govern- 
ment in ascertaining facts. If the facts of the case were quite 
clear, it would not be necessary to form any commission, and he 
supposed that these facts could be easily ascertained or that they 
had already been ascertained. If the Chinese delegates had a list 
of cases, he desired to have a copy thereof. 

Dr. Koo said that although he had no objection to giving a copy 
to the Japanese delegates he wondered if it w^as their intention 
to take up each case here. 

Baron Shidehara said it was not his idea, only he thought that 
wdth such a list he and his colleagues might be able to decide whether 
there should be a special commission or not. It might well be that 
even for the purpose of investigation of facts there was no need of 
an}^ special commission, for it seemed that some of the cases had 
already been referred to the Japanese authorities, and they must 
naturally have made inquiries. 

Dr. Koo said that all these claims were the aftermath of the whole 
Shantung question; since the two delegations were now settling the 
whole question, it seemed to him that they should also provide a 
way of disposing of small cases about which the Chinese people 
entertained a good deal of grievance. It would be in the interest 
of improved relations between the two countries that a speedy and 
satisfactory way of procedure should be provided in regard to these 
cases. 

Baron Shidehara said that it was the first time that a proposal 
of this kind had been made in a like case. No such procedure had 
been followed in the Russian war. 

Dr. Koo asked what Baron Shidehara proposed to replace the 
Chinese draft with. 

Baron Shidehara said that he did not think it necessary to make 
any special arrangements regarding the question now brought out. 
The Japanese authorities concerned would be properly instructed 
by the Japanese Government in respect of these claims. It was only 
a matter of convenience wdiether a commission should be formed or 
not. If the claims preferred should be established, the Japanese 
Government would naturally pay reparation so far as those pre- 
ferred against the Japanese authorities were concerned. In regard 
to claims against private Japanese the only way seemed to be to 
bring the matter before the consular authorities for examination 
and adjudication by the ordinary method provided for in the treaty 
between China and Japan. Should there be quite a large number of 
cases the Japanese Government could send an additional staff for 
the express purpose of dealing with those cases. 

Dr. Koo asked if he understood, that so far as cases of claims pre- 
ferred against the Japanese authorities were concerned, the Japanese 
Government would be ready to take up the matter and if found just, 



I 



329 

on investigation, the Japanese Government would either restore the 
property or make reparation therefor, but that the Japanese dele- 
gates preferred not to make any special agreement in that respect. 

Baron Shidehara said that Dr. Koo's understanding was correct. 

Dr. Koo said that he also understood that with regard to claims 
brought against Japanese subjects the Japanese delegates had no 
objection to having a Sino- Japanese commission investigate into 
them if such course should be found necessary, but that they were 
inclined to think that the consular authorities would be able to 
handle the matter with such additional staff as the Japanese Gov- 
ernment might send in case of need. 

Baron Shidehara said that that was the Japanese position. 

Dr. Koo said it was not his wish to prolong the .conversations any 
longer now that the two delegations were practically at the end of 
minor questions. To meet the Japanese point of view and at the 
same time not to overlook their own difficulty, the Chinese delegates 
would make this suggestion: That the two understandings he had 
just stated in regard to the cases of claims preferred against the 
Japanese authorities and Japanese subjects, respectively, should be 
quoted in the minutes of these conversations. Then in place of the 
express provision contained in the Chinese draft he would suggest a 
neutral clause to the effect that the omission of reference in the agree- 
ment on Shantung to the question of claims did not prejudice any 
claims which China or Chinese citizens might have against the Jap- 
anese Government or Japanese subjects arising during the period 
of Japanese occupation. The purpose was not to give rise to undue 
misgivings or criticism on the part of the Chinese people. 

Baron Shidehara asked if it was Dr. Koo's idea that that should 
be a special article in the agreement. 

Dr. Koo said that he should like to see that in the agreement. 

Baron Shidehara said that he did not think it advisable that such 
an article should be inserted in the treaty itself. The Japanese dele- 
gates would then have to say that the Japanese Government could 
not be held responsible for any damages that might have been caused 
by Japanese military operations in Shantung during the late war. 
If a clause like that were to be inserted in the treaty, it would give 
rise to misgivings. He thought that there was an agreement in sub- 
stance on the whole matter, but his idea was that it would not be 
necessary to make any special arrangement on that question. More- 
over, the respective positions of the two delegations in this matter 
had already been made clear in the minutes. It would not be neces- 
sary to make any special arrangement. 

Dr. Koo said that in that case he was not disposed to insist on 
inserting that article in the treaty, but he wished to have this other 
clause also recorded in the minutes with the agreement of the Japa- 
nese delegation — the clause that the omission of any reference to the 
matter in the agreement would not prejudice any Chinese claims 
against the Japanese Government or subjects. 

Baron Shidehara agreed. On the other hand, he would have it 
placed on record that the Japanese Government could not be held 
responsible for any damages which might have been caused by mili- 
tary operations of Japan in Shantung during the late war. 
Dr. Koo agreed. 



330 

Baron Shidehara said that, of course, as he had stated several 
times, it was to be understood that nothing which had passed here 
was to be taken as an acknowledgment on the Japanese part of the 
existence of those Chinese claims. There was no admission on the 
Japanese part that there were already justitied claims of Chinese 
citizens or the Chinese Government. 

Dr. Koo said that that was the Chinese understanding. He thought 
that each case would have to be decided upon its own merits. 

Mr. Hanihara said that the entries which had been agreed to be 
made in the record were not to be taken as an admission on the part 
of the Japanese delegates that there existed such claims against 
Japan or the Japanese. The matter had first to be investigated. 

Dr. Koo said that he had thought the Japanese consular authorities 
had been making detailed reports to their Government. 

Baron Shidehara asked if any of the cases of claims had ever been 
made known to the Japanese consular authorities. He thought it had 
been only the military authorities that had been approached so far. 

Dr. Koo said that the second of the instances he had mentioned 
had been taken up with the Japanese consul at Tsinan. 

Baron Shidehara said that the Japanese delegation did not deny 
the existence of claims, but they could not confirm it either, for they 
had no materials on the matter in hand. 

Dr. Koo said that the Japanese Government could naturally not 
be expected to make reparation for things of which they had no 
knowledge. The Chinese information was that the cases were estab- 
lished. He then asked if there were any other questions to be 
taken up. 

Baron Shidehara answered in the negative. 

QUESTIONS NOT SETTLED NOW. 

Dr. Koo said he understood that all other questions, whatever 
they might be, except that of the railway, which had not been brought 
up here, would be adjusted by the commissions if such adjustment 
should be found necessary. 

Mr. Hanihara said that that was a matter of course; that there 
might be matters about which the two delegations had no knowledge. 

Dr. Koo said that now that all minor and collateral matters had 
been disposed of, he wondered what should be the next step for the 
two delegations to take. 

Baron Shidehara asked if Dr. Koo didn't think it advisable for 
members of the delegations to compile the individual agreements 
so far reached and draft the agreement on the question of Shantung, 
leaving aside the question of the railway. 

TREATY FORM FULL POWERS. 

Dr. Koo said that he thought that should be done in time. As to 
the form the agreement was to take, he wondered if it was the inten- 
tion of the Japanese delegation to put the substance in a form of 
treaty or a convention. 

Baron Shidehara said that he had no definite idea; that it was 
rather an important point, which had to be considered. 



331 

Dr. Koo said the Chinese opinion was that an important question 
of this nature should be put in the form of a treaty. 

Baron Shidehara said that if the treaty was to be signed here 
both delegations would require full powers for that purpose. He 
did not know whether the general full powers they had would suffice 
or if it would be necessary for them to get special full powers. 

Dr. Koo said that perhaps special full powers would be necessary. 

Mr. Hanihara said that that was his personal impression, too. 

Baron Shidehara said that in that case the3r could not wait until 
the arrival of such full powers. He thought that some convenient 
method should be adopted. He would suggest an arrangement to 
the effect that the full powers should be presented by the respective 
Governments to the accredited minister of each other. If the full 
powers should be found in due and correct form by the ministers, 
their exchange might be done by telegraph. 

Dr. Koo asked if it was Baron Shidehara's idea that the respective 
Governments should first prepare full powers and show them to the 
accredited minister of the other. 

Baron Shidehara said that the presentation of the full powers to 
the Japanese minister at Peking or the Chinese minister at Tokyo 
would be taken as their proper presentation to the respective dele- 
gations here. 

Dr. Koo asked if it was the idea that as between the two delega- 
tions the telegraphic copies should be exchanged. 

Baron Shidehara answered in the affirmative. 

Dr. Koo asked if it was the intention of the Japanese delegates to 
conununicate with their Government to that effect. 

Baron Shidehara said that it was. 

Dr. Koo said that in view of the fact that the agreement had to 
be reported to the conference, he wondered if the Japanese delegates 
had any objection to having the respective Governments, while 
showing the full powers to the accredited ministe;:-s, also formally 
notify both the American Legation in Peking and the American 
Embassy in Tokyo, which in turn would report the matter to the 
United States Government. The Government here, as convener of 
the conference, assumed the responsibility that an agreement should 
be properly made on the Shantung question, so the notification 
suggested by him might be desirable. 

Baron Shidehara wondered if there was an understanding that the 
results of these conversations should be referred to the plenary ses- 
sion of this conference. 

Dr. Koo said that the Chinese understanding was that they should 
be reported either to the Far Eastern Committee or to a plenary ses- 
sion. It was purely a question of procedure, this matter of full 
powers. Perhaps it would not cause much inconvenience to either 
side, but the course suggested by him would be a useful step to take. 

Baron Shidehara said that lie did not quite understand the pur- 
pose of the Chinese suggestion. He wondered if the idea was to com- 
municate the terms of the agreement decided here to the American 
Legation at Peking and the American Embassy at Tokyo. 

Dr. Koo said that it was not the idea. His suggestion was that 
merely the fact of the full powers having been sent should be noti- 
fied to the American representatives at those two capitals. 



332 . 

Baron Shidehara wondered whether Dr. Koo proposed to omit the 
British Government. 

Dr. Koo said that he had made his suggestion because the Ameri- 
can Government was the convener of the conference, to which the 
proposed agreement would be reported. If it was Baron Shidehara's 
idea that the British Government ought to be included that might 
j)erhaps be a more perfect arrangement. 

Baron Shidehara said that he did not quite see the necessity of 
notifying the American Government of the fact that full powers had 
been sent. He did not see any practical necessity or reason for such 
a course. 

Dr. Koo said that the only point was that the American Govern- 
ment, as the convener of the conference, would like to know that the 
agreement had been duly made. 

Baron Shidehara said that this agreement could very well be com- 
municated to the government of tlie United States. In fact, he sup- 
posed that the agreement would be notified to all the nine powers 
assembled here. 

Mr. Hanihara said that it was not the case. 

Baron Shidehara pointed out the resolution passed by the nine 
powers. 

Mr. Hanihara said that that resolution would not come into force 
for some time yet. 

Baron Shidehara said that at any rate it was a matter of procedure 
only, Avhich could easily be arranged. 

Dr. Koo said that that being the case, the matter might be con- 
sidered as agreed upon. 

Mr. Hanihara said that if the Shantung agreement were to be re- 
ported to the conference it was necessary to distinguish between the 
conference of the nine powers and this Shantung conference. If the 
chairman of the conference deemed it proper, he might report it to 
the conference, as in the case of the Yap treaty, by way of informa- 
tion. But the conversations on this Shantung conference were no 
part of the business of the other conference; that was why it was 
necessary for the two delegations to get distinct full powers. 

Dr. Koo said that the Shantung negotiations were not directly 
part of the other conference, but were collateral to it. His proposal 
was only that the fact of the full powers having been dispatched 
should be communicated to the American representatives in Tokyo 
and Peking. 

Baron Shidehara thought it was hardly necessary. 

Dr. Koo suggested leaving the matter to the discretion of the 
respective Governments. As to the drafting, he wondered if the 
two delegations should meet in full force. 

DRAFTING COMMITTEE. 

Baron Shidehara suggested appointing two members of the dele- 
gations on each side. The draft prepared by them would, of course, 
have to be approved by the two delegations. 

Dr. Koo said that at least one delegate from each side ought to be 
present at the drafting committee. 

Baron Shidehara said that in that case three members from each 
side should be present. 



333 

It was agreed that the drafting committee should meet at 10.30 
Saturday. 

Dr. Koo said that there was another question — the question of the 
language to be used for the treaty. 

Baron Shidehara wondered if Dr. Koo preferred to have an 
English text only or to have Japanese and Chinese texts, with the 
text in a third language as the ruling one. 

Dr. Koo said that the ruling text should in this case be the lan- 
guage in which these conversations had been carried on. 

Baron Shidehara suggested proceeding with the English language. 
If either of the Governments deemed it necessary to have three texts, 
they could easily be made after the English text had been prepared. 

The meeting adjourned at 6.30 sine die. 

Washington, D. C, January 26, 1922. 

sJC-33.] January 26, 1922. 

[For the press.] 

Issued by the Chinese and Japanese delegations. 

At the thirty -third meeting of the Chinese and Japanese delegates 
relative to the Shantung question, held in the Pan American Union 
Building at 4 o'clock this afternoon, some minor points were brought 
up and concluded. A drafting committee relative to the Shantung 
question will meet at 10.30 Saturday morning, January 28, 1922. 



THIRTY-FOTJRTH MEETING. 

The thirty- fourth meeting, held in the governing board room, the 
Pan American Union Building, Washington, D. C., at 3 o'clock in 
the afternoon, Monday, Januarv 30, 1922. , /^ U vCt . 

PRESENT. 

China. — Dr. Sao-Ko Alfred Sze, Dr. V. K. Wellington Koo, Dr. 
Chunsr Hui Wang. Secretaries : Mr. Hawkling Yen, Mr. T. C. Yen, 
Mr. T. Y. Tsai, Mr. T. F. Hsu, Mr. C. H. Zee, Mr. Chuan Chao, 
Mr. T. H. Koo. 

Japan. — Baron K. Shidehara, Mr. M. Hanihara, Mr. K. Debuchi. 
Secretaries: Mr. S. Saburi, Mr. E. Kimura, Mr. H. Saito, Mr. T. 
Shiratori. 

Also present as observers : 

The United States of America. — Mr. John Van A. MacMurray, 
Mr. Edward Bell. 

The British Emjnre.—Mr. M. W. Lampson, M. V. O.; Mr. F. 
Ashton-Gwatkin. 

RAILWAY. 

Dr. Sze said that it was not useless that another effort should be 
made to see whether the conferees could not find avenues where the 
divergent views of the two delegations could meet on the question 

93042— 22^ 22 



334 

of the railway. There were three important points which had to 
be settled: First, the mode of payment; secondly, the period; and 
thirdly, the employment of Japanese experts. He wondered whether 
the Japanese delegates had anything new to suggest on these points. 

Baron Shidehara said that he had nothing new to suggest at 
that moment. Last time the question of the railway had been dis- 
cussed, Dr. Koo had said that he would like to report the whole mat- 
ter to Mr. Hughes and Mr. Balfour, and that the Japanese delega- 
tion would then be informed of the Chinese intention. They had 
not yet been informed as to the Chinese intention regarding the 
adjustment of the matter. He would like to know if the Chinese 
delegates had come to any decision in this matter. 

Dr. Sze said that the Chinese delegates had had occasions to talk 
the matter over with Mr. Hughes and Mr. Balfour and from an 
earnest desire to have the question settled at an early date, and being 
animated by a spirit of conciliation and fairness, the Chinese dele- 
gates had taken into serious consideration certain formulae suggested 
which it was understood had also been made known to the Japanese 
delegates. As to the question of the mode of payment, the Chinese 
delegates understood that the Japanese delegates were ready to ac- 
cept the payment for the railway by means of Chinese treasury 
notes. He wondered whether that was the understanding of the 
Japanese delegates also. 

Baron Shidehara asked whether the Chinese delegates could kindly 
let him and his colleagues know the formula for the adjustment of 
this question. 

Dr. Sze said that in the conversations the Chinese delegates had 
had with Mr. Hughes and Mr. Balfour the whole question had been 
divided into the three points he had just referred to. He had already 
mentioned the first. As to the second point the Chinese suggestion 
had been that after three years and a half China might at any time 
redeem all liabilities by paying the balance of the installments. The 
Chinese delegates had understood from Mr. Hughes that the Japanese 
wish had been that the PjDtion for the redemption could be exercised 
I only after five years, and if that option were not to be exercised, then 
the' liabilities would remain until the end of the fifteenth year. As to 
the experts, the understanding had been that there should be a Chinese 
chief accountant with a Japanese associate chief accountant, and Mr. 
Hughes had told the Chinese delegation that the Japanese delegates 
had insisted upon the appointment of a Japanese traffic manager, and 
that the}^ had offered that at the end of two years and a half a Chinese 
assistant traffic manager might be appointed so that he might gradu^ 
ally take over the duties after the fifth year if the entire liabilities 
were to be redeemed at the end of that period. He wondered whether 
that coincided with the Japanese understanding of the situation. 

Baron Shidehara said that he had understood from Mr. Hughes 

f and Mr. Balfour that their suggestion for the adjustment of this 

i question had been this : With regard to the period of time, the treas- 

i ury notes would run for 15 years. After the lapse of five years China 

should have the right to redeem the whole outstanding liability. As 

to the employment of Japanese railway experts, one Chinese and one 

Japanese were to be employed in the department of accounts. In 

i other words there were to be two coaccountants. They would have the 



335 

same functions and the same responsibility ; there would be two chief • 
accountants in the accounting department. As to the traffic depart- 
ment the Chinese Government should employ a traffic manager of 
Japanese nationality for the period during which those treasury notes 
should remain unredeemed, but with the understanding that after 
two years and a half from the date of the deposit of the treasury 
notes the Chinese Government might appoint an associate traffic 
manager, under the Japanese traffic manager, for the period of two 
years and a half. It was also understood that such Chinese assistant 
traffic manager might also be appointed at any time after the notice 
for the redemption was given. 

Dr. Sze requested Baron Shidehara to repeat the latter part of his 
remark, so that he, might correctly understand Baron Shidehara's 
meaning. 

Baron Shidehara said that after two years and a half from the date 
of the deposit of the treasury notes, the Chinese Government might 
appoint an associate traffic manager of Chinese nationality under the 
Japanese traffic manager for the period of two years and a half, but 
at the same time it was understood that such Chinese assistant traffic 
manager might be appointed at any time after the notice for the re- 
demption was given. 

Dr. Sze said that he was not quite clear as to the five-year period. 
He had thought that the period did not start from the date of the 
handing over of the treasury notes. It might take long before such 
handing over was effected, for printing and the signing of such 
notes would take quite a long time. iJe was saying that from his ^ 
personal experience in London. 

Baron Shidehara said that, at any rate, the deposit was to take 
place only several months from the signing of the treaty. It would 
first be necessary that the valuation of the railway properties should 
be made. China would have ample time in which to prepare the 
treasury notes. 

Dr. Sze said that in London he had been in charge of the issue of a 
quarter of a million pounds in treasury notes. It had taken him a 
long, long time for the wording and the printing, etc. He supposed 
that Japan would not insist upon all the printed notes being delivered 
on the day of the ratification of the treaty. On that date a pro- 
visional script would be given to the Japanese Government. He 
added that in Baron Shiclehara's own proposal, at the twentieth 
meeting, on January 6, it had been offered that the period for which 
the loan was to ru^n should be fixed at 15 years, while China should 
have an option for redeeming the outstanding liability on six months' 
notice after five 3^ears from the date of the agreement. 

Baron Shidehara said that he did not remember the exact wording 
he had used. But the treasury notes should run for the period of 
15 3'ears; that was to say, 15 years after the treasury notes were 
actually deposited in the Japanese hands. China would have to 
assume the responsibility from the date on which the treasury notes 
were delivered. 

Dr. Sze wondered whether he was to understand that the period 
would start from the date the treasury notes would be handed to 
the Japanese Government. 

Baron Shidehara replied in the affirmative. 



336 

Dr. Sze said that, of course, China could deliver the notes to Japan 
as soon as the}^ were ready. 

Baron Shidehara stated that the valuation of the railway and its 
appurtenant properties should first be made; otherwise they would 
not be able to ascertain the amount of China's liability. 

Dr. Sze wondered whether he was not to understand that during the 
15-year period China Avould pay one-thirtieth of the total amount 
of obligation every six months. 

Baron Shidehara asked whether it was Dr. Sze's idea to hand 
in one-thirtieth of the amount every half year, from the first year 
of the 15-year period. 

Dr. Sze replied in the affirmative. He thought that inasmuch as 
China was to pay every six months, one-thirtieth of the total obliga- 
tion should be paid each time. 

Baron Shidehara said that that was not his understanding. With- 
in the five-year period no redemption should be made. It Avas only 
after that five-year period that China could make any redemption. 

Dr. Sze desired to ascertain whether Baron Shidehara's idea was 
that China should pay nothing for the first five years. 

Baron Shidehara replied that it Avas the case. 

Dr. Sze inquired whether it was Baron Shidehara's idea that after 
five years China should pay in 20 installments. 

Baron Shidehara replied that he had no idea as to whether the 
payment should be divided into 20 or 10 or any number of install- 
ments. 

Dr. Sze asked, in case China should not redeem the notes, how 
Japan desired the payment to be made each year. 

Baron Shidehara said that that was a matter of detail. He had 
no idea as to how payment should be made. China might pay once 
a year or twice a year. Such details could easily be adjusted later. 

Dr. Sze agreed that that was a matter of detail, but if it could 
be settled here there would be the advantage of precluding later com- 
plications. As to the period of the valuation, that had already been 
agreed upon. He understood that Baron Shidehara's desire was to 
have the treasury notes handed over to Japan upon the determina- 
tion of the valuation, the period for which had been definitely 
decided. 

Baron Shidehara wondered if the period of valuation had been 
definitely agreed upon. As to the period of the transfer of the 
railway he remembered having said nine months tentatively. He had 
only thought that that might be the proper period. He had said 
that he had no technical knowledge and just tentatively suggested 
nine months. 

Dr. Sze pointed out that it had been agreed that : 

" Such transfer shall be completed as soon as possible, and in any 
case not later than nine months from the date of the coming into 
force of the present agreement." 

Baron Shidehara referred to the minutes of December 14, from 
which he read as follows : 

" Dr. Sze suggested that six months should be tentatively adopted. 

" Baron Shidehara said that he should like to refer that question 
to some technical export. 

"Dr. Sze said that a Chinese expert had advised him that six 
months would be ample time. As soon as an agreement was reached 



337 

the inventory of the properties would ha^e to be made. After that 
the transfer could completely be effected in six months. 

" Baron Shidehara proposed that it should be nine months tenta- 
tively. He could not tell just now without any technical knowledge 
just what would be the most adequate length of time, but he would 
like to make it nine months, subject to modification. 

" Dr. Sze agreed." 

Dr. Sze wondered in what connection that conversation had taken 
place. • 

(Baron Shidehara handed over the minutes to Dr. Sze.) 

Dr. Sze, continuing, stated that at that moment Baron Shidehara 
had said that he had still lacked technical advice. He wondered 
whether the baron could not now give a definite period. 

Baron Shidehara said that, as a matter of fact, that was not a 
very important point and he had not given much consideration to 
it. He thought, however, that the two delegations were now going 
to confirm what those two statesmen had told them. The period of 
transfer had not been touched upon in the conversations with these 
two statesmen. 

Dr. Sze replied in the negative. He thought, however, thgit the 
conferees had reached a point where they should definitely settle all 
minor points. The Chinese delegation had taken it for granted 
that nine months was a settled period. 

Mr. Hanihara asked whether Dr. Sze meant nine months from 
the date of the coming into force of the agreement. 

Baron Shidehara said that when the question of the period had 
been discussed, they had adopted a formula to that effect. It was 
expressly provided in the agreement in that sense. 

Dr. Sze wondered whether that understanding did not still hold 
good. 

Baron Shidehara said that he had suggested nine months tenta- 
tively, and there the matter rested. 

Dr. Sze wondered whether Baron Shidehara could now give the 
period definitely. 

Baron Shidehara said that he had rather neglected that point. 
He had to consult a technical expert. The point could be decided 
very easily, anyway. 

Dr. Sze inquired how soon he could get a definite answer. 

Baron Shidehara said that he would reply the following day. 

Dr. Sze thanked Baron Shidehara for that statement. He con- 
tinued that there were two other dates to be decided. As to the 
general outline of the Shantung agreements to be reported to Mr. 
Hughes and Mr. Balfour, there would not be much difficulty in 
coming to an agreement. Minor points need not be touched upon 
in the proposed communication. He added that, as to the Japanese 
accountant and the Japanese traffic manager, they were to be selected 
and appointed by the Chinese general manager. 

Baron Shidehara responded that the Chinese Government would, 
of course, appoint those experts, but with the concurrence of the 
Japanese Government. 

Dr. Sze remarked that that was a new point; that was what he 
did not understand. He had thought that the Chinese managing 
director was to select 'and appoint those experts. That was what 
Mr. Hughes and Mr. Balfour had said. 



338 

Baron Shidehara thought that that point had been very well 
understood. 

Dr. Sze said that his understanding was different. Mr. MacMur- 
ray and Mr. Lampson would know that. 

Mr, MacMurray thought that the manner of appointment had not 
been considered. It was simply said that the expert would be ap- 
pointed by China. 

Baron Shidehara pointed to the Avording in draft D (not attached 
to the minutes), which expresslf stated that the selection and ap- 
pointment should be made with concurrence of the Japanese Govern- 
ment. 

Mr. Lampson said that it was stated that the Japanese experts 
would be selected and appointed with the concurrence of the Japa- 
nese Government. 

Baron Shidehara said that the idea was simply that the best quali- 
fied Japanese exj^erts should be appointed and the Japanese Govern- 
ment would be, in the best position to know who were so qualified. 

Dr. Sze said that he had mentioned to Mr. Hughes and Mr. Bal- 
four that the Japanese experts should not in any sense be the agents 
of the Japanese Government. 

Baron Shidehara said that that was entirely a different matter. 
/The fact that the Japanese Government would give concurrence was 
I no proof of these experts being Japanese agents. The idea was 
simply that the Japanese Government would be best able to recom- 
mend the best qualified men. 

Dr. Sze inquired whether Baron Shidehara was saying that he 
(Baron Shidehara) had heard such views from Mr. Hughes and 
Mr. Balfour. The Chinese delegates, on their part, had never heard 
such a statement. 

Baron Shidehara said that that was what the Japanese delegates 
had understood from the gentlemen who were here as observers. 

Mr. Lampson said that it had quite clearly been stated that the 
Japanese experts should be selected and appointed with the concur- 
rence of the Japanese Government. 

Dr. Sze said that the point now raised was something new. The 
formula D had not been adopted. That was the understanding of 
the Chinese delegates. 

Baron Shidehara thought that formula D had been adopted as the 
basis of discussion. True, some alterations had been introduced, but 
where no alterations had been made he had taken it for granted that 
the original formula had been the basis on which the Chinese dele- 
gation had proceeded. He, continuing, said that the appointment 
of such experts, with the concurrence of the party financing the 
railway, was not quite a novel idea. For instance, in the agreement 
between the British- capitalists and the Chinese Government in 
regard to the Nanking-Hunan Railway, it was provided that the 
engineer in chief would be " chosen and appointed by the directorate 
general of railways of the ministry of communications with the pre- 
vious consent of the corporation." 

Dr. Sze remarked that the corporation and the Government were 
different. 

Baron Shidehara stated that the Chinese delegates did not, how- 
ever, agree to the idea of loan. 



339 

Dr. Sze said that such had not been his understanding. 

Mr. Hanihara said that perhaps Dr. Sze had been under tlie impres- 
sion that the Japanese Government might not give consent to the 
appointment of experts by the Chinese Government. 

Dr. Sze said that the Chinese Government was not only to make 
the appointment but also to make the selection. 

Mr. Hanihara said the selection and appointment would be made 
with the consent of the Japanese Government. 

Dr. Sze remarked that " consent " was even stronger than " con- 
currence." 

Mr. Hanihara said that he had used the word " consent " in the 
same sense as " concurrence." 

Dr. Sze said that to his mind they were different. 

Mr. Lampson presumed that the idea was to make an arrangement 
which would in practice work smoothly. In selecting and appointing 
the Japanese experts, the Chinese Government would not wish to 
choose any man whose selection would be disagreeable to the Japanese 
Government. 

Dr. Sze said that the whole idea was to remove the cause of mis- 
understanding altogether., The Chinese delegates could not go into 
any engagement which might become the source of continuous mis- 
understanding. That was a dangerous thing. 

Baron Shidehara said that if this matter were to be an ordinary 
loan agreement, those men would be appointed with the consent or 
concurrence of the capitalists interested, but the Chinese delegates 
had preferred the form of treasury notes. Therefore the arrange- 
ments had now to be entered into between the two Governments in- 
stead of between the Chinese Government and Japanese capitalists. 

Mr. MacMurray said that perhaps he might say a few words. He 
would say that it was unfortunate that the point now at issue had 
not happened to come up when the British and the American repre- 
sentatives had talked the matter over with the Chinese delegates, but 
he had always taken it for granted that the Chinese Government 
would, in practical course, consult the Japanese Government in the 
appointment of experts in order to make sure that there should be no 
selection which would cause friction. 

Dr. Sze said that if the points at issue had been mentioned in the 
understanding reached with Mr. Hughes and Mr. Balfour, it would 
have been all right. But as it was, he would not be able to report the 
matter to his Government now. What he feared was the reaction 
upon the joeople at home. They would say that the Chinese delegates 
had now agreed to a plan which was much worse than the one or 
December 19 ; that after Mr. Hughes and Mr. Balfour had come in, 
the settlement had been made worse than before. Such reaction was 
undesirable to all concerned. 

Dr. Koo thought that this was really a practical question. In the 
selection of suitable Japanese for the posts, the Chinese Government 
would have in view the safeguarding of the Japanese interests as 
well as the Chinese interests. The Chinese Government would do 
their best to obtain the best-qualified men. He took it that the first 
step would be to canvass all available Japanese in the Chinese railway 
service. If none of them was found good enough for the important 
posts, then the Government would naturallv, as a practical course. 



340 

turn to the Japanese authorities for information. Therefore, looked 
at from that practical point of view, the question would not seem 
one of very great magnitude. With that explanation, he thought that 
reference to this point in the agreement would not be at all necessary. 

Baron Shidehara asked if the Chinese delegates would object to 
substituting the word " consultation " for the word '' concurrence." 

Dr. Sze said that what had been said by Mr. Balfour and Mr 
Hughes had been reported by the Chinese delegates to their Govern- 
ment. The report had made it clear that the point at issue would 
not be included in the agreement. As a general principle, he thought 
it was not good policy, and it was repulsive to his feeling of fairness, 
to come back on a point upon which an agreement had already been 
reached. 

Baron Shidehara said that the question was only a matter of prac- 
tical convenience and did not in the least affect the right of the 
Chinese Government to select those experts. If the Chinese Govern- 
ment would select men not quite agreeable to the Japanese Govern- 
ment, difficulties might occur. The sole motive animating the 
Japanese delegates was that the best-qualified men should be 
suggested. , 

Dr. Sze said that he objected to the course suggested on the same 
ground as Baron Shidehara had based his objection on another 
matter. He meant to say that the clause might be a reflection upon 
the Chinese managing director, it being an implication that he might 
not make a fair selection. 

Baron Shidehara said that no reflection was implied. The 
Japanese Government would naturally know better than anybody 
else wdio would be the best candidates. It was no reflection upon 
the railway management or the department of communications of 
China. It was only said that the Chinese Government should ap- 
point those men upon consultation with the Japanese Government. 
There was nothing which would affect the sovereign rights of China. 
Consultation was quite a common thing among Governments. 

Dr. Koo thought that, after this exchange of views, it was found 
that both delegations agreed in substance. The matter could safely 
be left to the good will and practical wisdom of the Chinese Gov- 
ernment, because to make special reference to a point which, as a 
matter of practical arrangement, would be followed in any case, 
might unnecessarily wound the susceptibility of the Chinese people. 
He trusted that that was not the desire on Japan's part. In view of 
the stage the two delegations had already reachecl, he hoped that, 
with those explanations based upon practical considerations, the 
\ Japanese delegates would not insist upon inserting the phrase under 
discussion in the agreement. 

Baron Shidehara said that if Dr. Koo had objections to inserting 
the particular phrase in the text of the agreement he might possibly 
agree that it should be kept in the minutes of the proceedings that, 
in the selection and appointment of those experts, the Japanese Gov- 
ernment would be consulted. 

Dr. Koo said that he did not wish to be punctilious as to the way 
of expressing it, but he wondered whether the following formula 
would not meet the approval of the Japanese delegates : 

" The Japanese Government will be requested to give such infor- 
mation as may be useful to making a suitable selection." 



341 

The object was to make a suitable selection. So long as that could 
be secured, he thought it was sufficient. He hoped that the Japanese 
delegates would agree to keep the formula suggested in the depths 
of the minutes. 

Baron Shidehara wondered whether Dr. Koo's meaning was that 
before the selection of experts the Chinese Government would ask 
the Japanese Government for information. 

Dr. Koo said that that was the case. The purpose was to make it 
possible to select the best men available. 

Baron Shidehara suggested the formula : 

" In the selection of the Japanese experts upon the railway the 
Chinese Government will ask the Japanese Government for such in- 
formation as may be useful in the making of suitable selections." 

Dr. Koo accepted. 

Baron Shidehara said that that would be recorded in the minutes. 

Dr. Koo said that the two delegations could now consider the point 
as settled. 

Dr. Sze said that the position of the two delegations had been 
made clear in regard to the question of the selection and appoint- 
ment of the Japanese traffic manager as well as the chief account- 
ant. He would further point out that they would be the employees 
of the Chinese Government and would be placed under the control 
of the Chinese managing director, who would be appointed by the 
Chinese Government. These two experts would not in any way be 
the agents of the Japanese Government. 

Baron Shidehara said that that was certainly the case ; they were 
not the agents of the Japanese Government and would be under the 
supervision and control of the Chinese managing director. He won- 
dered whether there was also an officer with the title of director gen- 
eral in the Chinese railway administration. 

Dr. Sze said that formerly there Was such a post. A director 
general would be appointed on lines in the course of construction; 
but with lines finished, only managing directors would be appointed. 

Mr. Hanihara said that he understood that there was some such 
post as that of director general in the department of communications 
or the department of the railways. 

Dr. Sze said that the chief of the railway bureau, who was under 
the central ministry of communications, acted more or less as the 
director general. He would say a few words on one or two points 
in connection with the traffic manager. China had general traffic 
rules applicable to all Chinese railways. The intention of the 
Chinese delegation was that these rules should apply to the Shan- 
tung Railwaj^ as well. It was desirable that the best and the most 
suitable men should be appointed to those posts. If the Japanese 
experts were found to be such, all would be well; but, in case they 
were found not satisfactory, the Chinese Government would, of 
course, have the right to appoint other men. 

PRESENT RAILWAY STAFF. 

As to the present Japanese railway staff sufficient notice would be 
given them before replacement. As there would be certain lapse 
between the coming into force of the agreement and the transfer of 



342 

the railway, the Chinese delegates would think that the period woidd 
be sufficient notice to the men now living' on the railway. 

Baron Shidehara wondered if he understood correctly that China 
was going to give notice to the present railway staff when they were 
to be discharged. 

Dr. Sze said that the Chinese Government could not give notice 
to the railway men who were Japanese employees. Between the time 
of the transfer and the coming into force of the agreement there 
might be time enough. He would suggest that as soon as the treaty 
came into force the Japanese Government might give notice to the 
railway staff. 

Baron Shidehara thought that the discharge of the present rail- 
way men was a mere matter of detail, which could very easily be 
arranged between the Chinese and Japanese commissions. 

Dr. Sze thought it advisable to agree upon a general principle in 
the matter. 

Baron Shidehara said that the Japanese delegation was not going 
to make it a condition of the transfer of the railway that these men 
should be kept. It was a matter of convenience only. He would 
prefer that the matter should be left to be worked out by the joint 
commission. 

Dr. Sze said that what he proposed was the general principle. 
Details could, of course, be arranged by the commission. 

Baron Shidehara said that the agreement was not to contain any- 
thing which would bind the Chinese Government to retain these men. 

Dr. Sze said that it was exactly so, but it would be desirable that 
an agreement in principle should be made regarding the railway 
staff, so that the Chinese Government might start operation immedi- 
ately upon the transfer of the railway and the service might be 
continued without any interruption. 

Baron Shidehara said that the principle was that there should be 
no Japanese employees when the transfer of the railway was com- 
pleted. It would be only a matter of convenience if the managing 
director should decide that some Japanese should be kept at their 
posts for some time. 

Dr. Sze said that he did not want to have it said that any Japanese ' 
employees w^ere to remain as a matter of right. 

Baron Shidehara said that so long as nothing to the contrary was 
provided, there was no question that no Japanese could remain on 
the railway as a matter of right. 

Dr. Sze said that he had thought the period of notice to be given to 
the Japanese employees was to start from the date of the coming 
into force of the agreement. He wondered if it was Baron Shide- 
hara's understanding that it would depend upon the discretion of 
the managing director whether any members of the Japanese staff 
should be retained or not. 

Baron Shidehara answered that it was. He added that he pre- 
sumed that it was not the Chinese intention to restrict the ordinary 
functions of the traffic manager. The appointment of the railway 
staff was, of course, to be in the hands of the Chinese managing 
director, but he presumed that it was not intended to limit the ordi- 
nary functions to be exercised by a traffic manager. 

Dr. Sze said that there was no such intention. What he would 
suggest was that while the power of the traffic manager would not be 



343 

limited, he should not insist upon retaining the Japanese railway 
staff. On roads where foreign traffic managers were employed they 
did not exercise any power regarding the appointment of the railway 
staff. 

Baron Shidehara said that certainly the staff would be chiefly 
selected from Chinese nationals and the appointment would be made 
by the managing director. 

Dr. Sze said that in the employment of foreign nationals the extra- 
territorial right enjoyed by them and the question of wages had to 
be taken into consideration. There was no intention to discriminate 
against the present employees, but efficiency was the great point. 

Baron Shidehara asked if his understanding was correct as re- 
garded the main points of the whole question. 

Dr. Koo asked to what Baron Shidehara was referring. 

Baron Shidehara said that Dr. Sze had mentioned the suggestions 
of Mr. Hughes and Mr. Balfour as to the settlement of this railway 
question. It seemed there were some points of difference between the 
Chinese statement and his understanding. For instance, with re- 
gard to the question of the chief accountant, he and his colleagues 
had understood that there would be coaccountants— one Chinese and 
one Japanese — who w^ere to act together, both with the same func- 
tions. 

Dr. Sze said that he had no objection to that understanding. 

Baron Shidehara asked w4iat would be the name of the two co- 
accountants. 

Dr. Koo said that both could just be called " accountant." The 
Chinese understanding was that the Chinese accountant should be 
associated with the Japanese accountant with coordinate power. 
Referring to the question of the present employees, he thought 
that the views of the Japanese ancl the Chniese delegations coin- 
cided. That was to say, with the transfer of the railway the Chinese 
authorities would have the full power and discretion to remove or 
continue the present staff, as they saw fit. The period of time be- 
tween the date of the coming into force of the agreement and the 
transfer of the railway should be considered as a due notice in case 
of removal. 

Baron Shidehara said that with regard to the question of notice he 
had not meant to say that the period between the enforcement of 
the agreement and the transfer of the railway would be sufficient 
notice. It was not his intention to express an opinion on the matter. 
It was a matter of convenience and could be arranged later. The 
question of appointment or discharge of these men was in the hands 
of the Chinese managing director. If that point was made clear, he 
did not think it necessary to discuss as to what would be a proper 
notice of discharge. 

Dr. Sze said that when the line was transferred, even in part, the 
operation of the traffic department would have to start immediately. 

Dr. Koo said that on this question of notice perhaps some expres- 
sion would be desirable, so as not to take the present employees by 
surprise. He would suggest wording it thus : 

" It is "understood that on taking over the railway the Chinese 
authorities shall have full power and discretion to continue or to 
remove, as they see fit, the present employees of Japanese nation- 
ality in the service of the railway, and that the time between the 



344 

coming into force of the present agreement and the transfer of the 
railwaj^ may be considered as due notice." 

He thought that in all probability a certain class or number of 
Japanese employees would have to be replaced by Chinese. That was 
naturally to be expected. The Chinese delegation therefore wanted 
to have that class of employees prepared, more or less, beforehand, 
so that they could not very well say that sufficient notice had not 
been given them. It was equally possible that in certain departments 
it would not be necessary to replace the present employees immedi- 
ately on taking over the railway. The phraseology proposed by him 
would serve the purpose in either case. 

Baron Shidehara wondered if it was Dr. Koo's idea to have that 
clause incorporated in the text of the treaty. 

Dr. Koo said that he had not thought about that point. 

Baron Shidehara said that he did not think it necessary to refer 
to the present employees. The Japanese idea was that all that the 
treaty should provide for was the question of the appointment of 
the two railway experts, the traffic manager, and the accountant. 
The question of notice or how many months should be allowed the 
men was a matter of too much detail. He was not prepared to give 
an opinion, because he did not knoAv anything about railway practice. 

Dr. Koo said that the Chinese proposal was simply to facilitate 
the transfer on one side and the taking over on the other side. If 
Baron Shidehara preferred to have it recorded in the minutes in- 
stead of the treaty, he would have no objection. 

Baron Shidehara asked if it was the Chinese intention that the 
Japanese authorities should give a wholesale notice to all the em- 
ployees. 

Dr. Koo replied in the negative. It seemed to him advisable 
that in order to protect the interest of the present employees they 
should be prepared for possible replacement. If the matter should 
be left aside, it might be awkward for them. It would be much 
better that caution should be given them. If some of the present 
employees should be allowed to remain after the transfer of the 
railway, it would be in the nature of a pleasant surprise to them. 
If there were no caution, those who were to be replaced would feel 
wronged. 

Baron Shidehara said that the question of who and how many 
should be retained could not be decided here. The matter would have 
to be decided by the Chinese managing director and the Japanese 
authorities. It would be impossible to give notice unless it had been 
decided who should be retained. If notice had once been given and 
then it should be decided that some of the employees should be re- 
tained, difficulties might arise because some of those men might not 
desire to stay. The matter could best be left to the arrangement 
between the Japanese and Chinese commissions. 

Dr. Sze said that if no notice had been given it would mean that 
when the two commissions met the Chinese Government was under a 
sort of obligation to keep the Japanese employees. Wlien it had 
been decided that a Japanese traffic manager should be employed it 
had been stipulated that his staff should be composed of Chinese, 
except his personal aids, such as secretaries and stenographers. 



345 

Dr. Koo said that as a matter of practical arrangement he thought 
the question of who or how many of the present employees should 
be replaced would have been arranged long before the transfer of 
the railway. The idea was to give adequate notice to those who 
would be replaced. If nothing had been said here as to the matter 
of notice, both the Japanese and the Chinese authorities would be 
unable to give adequate notice for any replacement to take place 
on the date of the transfer. 

Baron Shidehara wondered if it was Dr. Koo's idea that notice 
should be given only to those who were to be retained after the 
transfer. 

Dr. Koo said that in practical application those who would be 
replaced would have received notice. If nothing was said on the 
point here, it would be impossible to discharge the present employees 
bj^ giving them even a day's notice. 

Baron Shidehara said that when the commissions met it would be 
decided who or how many should be retained. 

Dr. Koo said that in all probability the Chinese authorities, before 
the transfer of the railway, would have prepared a list on the matter 
and would have organized a Chinese staff. They would be ready 
to pass the information on to the Japanese authorities as much in 
advance as possible before the transfer. 

Baron Shidehara said that without such a list it seemed impossible 
for the Japanese authorities to give notice to their employees. All 
Japan could do was to give a full notice of discharge on the date 
of the transfer. If the list could be given a long time in advance suf- 
ficient notices could be given, but if it should come only a day or two 
before the transfer that would be unfair to the Japanese employees. 

Dr. Sze asked how long a notice had been given to the Chinese 
employees when Japan had taken over the railway from Germany. 

Baron Shidehara said that he did not know anything about it, 
but he thought all that could be arranged here was that to those 
who were to be retained reasonable notice should be given. 

Dr. Sze said that the notice which had been given to the Chinese 
employees on the same railway would be considered a reasonable 
notice in the case of the Japanese employees also. 

Baron Shidehara said that he had no special knowledge of railway 
practice, but that it occurred to him that it depended on the kind 
of posts held by the Japanese employees. In the case of a daily 
worker, for instance, the notice could be very short, but in the case of 
those occupying more important posts a longer time would be needed. 

Dr. Sze said that it was true, but what, for instance, a Chinese 
mechanic had been given might justly be given to a Japanese 
mechanic. 

Baron Shidehara asked if the Chinese delegates did not think that 
the question might be left to arrangement between technical men on 
both sides. 

Dr. Sze said that an agreement might be made on general principles 
here. 

Baron Shidehara said that the principle was that a notice fair and 
reasonable to all should be given. 

Dr. Sze asked what was the usual amount of notice given in Japan 
in such a case. 



346 

Baron Shidehara said that so far as he knew there was no definite 
regulation about the notice to be given in such a case. The matter 
was of too technical a nature and all that could be arranged here 
was that reasonable notice should be given the Japanese employees. 

Dr. Sze said that it was not exactly a technical question, but rather 
a question of general principle. To avoid the possibility of misun- 
derstanding it seemed advisable that some understanding should 
be reached here so that there might not be any hitch in the transfer 
of the railway. 

Baron Shidehara said that in Japan, in the case of a Government 
official, unless charged with some unlawful act, he is, on dismissal, 
placed on a list of reduced pay for a period of two years. 

Dr. Sze said that in China an employee could be instantly dis- 
missed for misconduct or a violation of the terms of contract, and 
even passage money could be refused in case of a foreigner. In case 
of stoppage of engagement, employees were given uniform notice of 
one month, though in the case of foreiirners it depended upon the 
terms of the contract. In view of the fact that the Shantung Rail- 
way men were Japanese Government employees, the Chinese Gov- 
ernment would be under no obligation to give allowance to them for 
two years. Still, it would be better to have some understanding on 
the point. The idea was to avoid dispute or misunderstanding. 

Baron Shidehara said that the difficulty was that it did not seem 
practicable to decide all these minor questions. In regard to the rail- 
way employees, the only principle that could be adopted was that a 
fair and reasonable notice should be given them. As to the length 
of time or the exact conditions of discharge, such as the allowance to 
be giren, it was impossible to take up the matter here. 

Dr. Sze asked if Baron Shidehara expected the Chinese Govern- 
ment to give the railway employees monetary allowance. 

Baron Shidehara said that in Japanese practice allowance was 
given in such a case. 

Dr. Sze asked if it was given in case no notice was given. 

Baron Shidehara said that in the case of Government officials no 
notice was given, but they were entitled to allowance for a certain 
number of years. It was rather a complicated question. 

Dr. Sze said that as to the traffic manager and chief accountant, 
the appointment would cease if everything went well and the Chi- 
nese Government redeemed the treasury notes. They would not stay 
long on the railway. 

Mr. Hanihara asked if Dr. Sze was referring to the tenure of office 
of these men. 

Dr. Sze said that his point was that these men were not to be 
bound by the Japanese civil-service rule. 

Baron Shidehara said that he was only giving the actual practice 
in Japan. 

Dr. Koo said that as to the question of giving notice to the 
Japanese employees, both sides agreed that such notice should be 
given; at least, on the Chinese side they would give notice before 
replacement. The question centered on one point. There were cer- 
tain posts which it would be necessary to fill with Chinese nationals 
as soon as the railway had been taken over. To those Japanese who 
were now occupying such posts notice would be given before the date 
of the transfer. He thought that was the understanding. 



347 

Baron Shidehara asked if a list would be given the Japanese 
authorities. 

Dr. Koo said that information would naturally be furnished to the 
Japanese authorities so that they could given the necessary notice. 

Baron Shidehara assented. 

Dr. Koo said that he would now modify his formula as follows : 

" It is understood that on taking over the railway the Chinese au- 
thorities shall have full power and discretion to continue or remove 
the present employees of Japanese nationality in the service of the 
railway, and that reasonable notice may be given before the date of 
transfer of the railway." 

Baron Shidehara said that the notice would be given, of course, by 
the Japanese authorities. After the transfer it was the Chinese, but 
before it was the Japanese, authorities who would give the notice. 

Dr. Koo agreed and asked if the matter might now be considered 
as agreed upon. 

Baron Shidehara said that he thought the formula acceptable. It 
was understood that it was to be recorded in the minutes, being only a 
matter of detail. Moreover, the details of the matter had to be 
worked out by the Japanese and Chinese authorities. 

Dr. Koo said that there was no detail except the transmission of 
information to the Japanese authorities. He presumed that it was 
not the Japanese intention to deliberate with the Chinese authorities 
as to what posts were to be replaced with Chinese. 

Baron Shidehara said that it was not, but that should some of the 
men who were intended to be retained want to go home, then the 
Japanese railway authorities might suggest others who would be will- 
ing to stay; such details had to be arranged, anyhow. The Sino- 
Japanese joint commission would have to arrange these matters in 
the interests of the railway. 

Dr. Koo said that he did not quite understand what Baron Shide- 
hara meant by details. Speaking generally, he believed that the Jap- 
anese authorities would transmit to the Chinese authorities such in- 
formation as they had concerning the intentions of the employees. 
The Chinese plans would have to depend on the information of that 
nature. 

Baron Shidehara said that it was so, but that the two delegations 
could not say here what, for instance, would be the reasonable notice 
to be given to the employees. Again, it might be that in case A and B 
should not desire to stay with the railway, C and D, equally qualified 
for the particular posts, might be retained. Such matters could not 
be decided here. 

Dr. Koo said that in such a case, C and D might not be equally ac- 
ceptable to China. The question was one of practical application. 
As soon as the Japanese authorities received a list from the Chinese 
authorities, the Japanese authorities might prepare information for 
the Chinese authorities and might even suggest modifications in the 
Chinese plans. There was nothing in the proposed draft which 
would prevent such a step being taken by the Japanese authorities. 

Baron Shidehara said that it was not merely a question of informa- 
tion. If, for instance, the Chinese authorities suggested a week's 
notice, the Japanese authorities would naturally say that one week 
was not enough. Such matters had to be settled between the Jap- 
anese and Chinese authorities. 



348 

Dr. Koo asked Baron Shidehara if the Japanese anxiety was as to 
what constituted a reasonable notice. 

Baron Shidehara said that it was not only that but that he would 
like to have some provision for matters that might arise in carrying 
into effect the present agreement. The Japanese authorities would 
be placed in an impossible position if all matters were specifically de- 
cided here. The Japanese delegation had no hidden motive what- 
ever. But they had no knowledge of railway practices. It must 
naturally be anticipated that some questions would arise regarding 
the disposi^tion of these railway men which had necessarily to be left 
to the arrangement on the spot. 

Dr. Koo said that this question of the appointment of the railway 
staff might safely be left to local arrangement, but he wondered if 
that would be necessary to be mentioned in the agreement. He 
wanted to know what detailed arrangement Baron Shidehara had in 
mind. Should there be made a special provision on this point, it 
would give the impression that there were numerous points to be 
settled by the local authorities, w^hich was not exactly the case. 

Baron Shidehara said that there was at least one point to be so set- 
tled — that was to say, the question of notice. 

Dr. Koo wondered how Baron Shidehara proposed to word that 
point. 

Baron Shidahara said that he would simply say, " Details shall be 
arranged by the joint commission on the spot." 

Dr. Koo proposed the following: 

" Detailed arrangements regarding the notice to be given to the 
present railway staff are to be made by the Chinese and Japanese 
joint commission." 

Baron Shidehara said that the difficulty was that it was not known 
if the question of notice was the only point requiring arrangement. 

Dr. Koo asked if Baron Shidehara had any other point in mind. 

Baron Shidehara said that he had no particular point in mind, but 
that there might be other questions. 

Dr. Koo supposed that it was of course understood that the question 
of notice and replacement after the railway had been taken over was 
to be decided by the Chinese authorities. He thought that Baron 
Shidehara was only referring to the replacements to be effected im- 
mediately upon the transfer of the railway. In other words, the 
mutual idea might be expressed by the following : 

"Detailed arrangements concerning replacements to take effect 
immediately upon the transfer of the railway to China are to be made 
by the Japanese and Chinese authorities." 

Baron Shidahara agreed that the above understanding should be 
kept in the minutes. * 

Dr. Koo pointed out that this understanding was in addition to the 
one proposed by him. Then, concerning experts, he understood that 
the two delegations were agreed substantially, and he had made a 
draft as follows : 

, " Pending the redemption of the said treasury notes, the Chinese 

' Government will select and appoint for so long a period as the said 

notes shall remain unpaid a Japanese national to the post of traffic 

manager and another Japanese national to the post of accountant, 

to cooperate with the Chinese accountant, all under the direction, con- 



349 

trol, and supervision of the Chinese managing director, and remov- 
able for cause — it bein<y understood that this arrangement does not 
prechide the appointment of a Chinese traffic manager to assist the 
Japanese traffic manager at the end of two and one-half years from 
the date of the transfer of the railway to China ; and, further, that 
the entire subordinate staff, which is to be composed of Chinese 
nationals, except the private clerical staff of the said traffic manager, 
which may be of another nationality, is to be appointed by the said 
Chinese managing director." 

He wondered whether the proposed draft represented fully the sub- 
stance of the understanding between the two delegations. 

Baron Shidehara wondered if Dr. Koo was making a provision in 
the sense that only the clerical staff of the traffic manager should be 
retained in the service of the railway. He did not exactly understand 
the proposed draft read to him, but the latter part of the draft seemed 
to impl}^ that only the clerical staff of the traffic manager was to be 
filled by Japanese nationals. 

Dr. Koo said that his draft had been made to reproduce correctly 
the understanding which the two delegations had concerning the sub- 
ordinate staff. The draft did not preclude the Chinese Government 
from employing any other nationals in the service of the railway, but, 
in order not to allow any misunderstanding to arise, he thought it wise 
to draft the matter in the way proposed by him. 

Baron Shidehara said that it Avas, of course, understood that the 
power of appointment rested with the Chinese Government, but he 
did not think it necessary to say that only the clerical staff would be 
appointed from among the Japanese nationals. It was a matter of 
convenience only; the selection and appointment of the subordinate 
staff must be left to the discretion of the Chinese managing director. 
The proposed draft might seem to imply that the private clerical 
staff of the traffic manager was not to be appointed by the Chinese 
managing director. 

Dr. Koo said that his draft might be incomplete in wording, but 
he did not mean that the clerical staff should not be appointed by 
the Chinese managing director. 

Baron Shidehara w^ondered if Dr. Koo could not agree to the sup- 
pression of the entire concluding paragraph. It was not necessary 
to say that " the entire subordinate staff was to be composed of 
Chinese nationals, etc.," or that it would be only the " private clerical 
staff " of the traffic manager, which would be composed of Japanese 
nationals. There might be Japanese nationals who would be ap- 
pointed to other posts than the traffic manager's private staff, but so 
far as there was no special clause in the agreement Japan had no 
right to insist upon Japanese nationals being appointed to such posts. 

Dr. Koo said that with regard to the nationality of the traffic man- 
ager's private clerical staff, there was nothing fixed in the draft, 
the wording being that such staff " might be of another nationality." 

Baron Shidehara pointed out that Dr. Koo's formula said that 
the entire subordinate staff, except only the clerical staff of the traf- 
fic manager, should be composed of Chinese nationals. He did not 
see any necessity of reference being made to the composition of the 
subordinate staff. 

93042—22—23 



350 

Dr. Koo said that both Mr. Hughes and Mr. Balfour had confirmed 
the Chinese understanding that in undertaking to appoint a Japa- 
nese national to the important post of traffic manager, China was 
not obliged to give the subordinate posts in the traffic department 
likewise to Japanese nationals. The giving of that important post 
to a Japanese was bound to give rise to a great deal of apprehension 
on the part of the Chinese people and it was partly for that reason 
that the Chinese delegates for the last six weeks had been taking the 
position that the post should be filled by a Chinese national. As 
had been stated, hoAvever. by his colleague, as evidence of their spirit 
of conciliation and of their desire to bring these conversations to a 
happy conclusion, the Chinese delegates were now disposed to accept 
the Japanese proposal to have Japanese nationals for the posts of 
traffic manager and chief accountant. They felt certain that such 
appointments would rouse strong opposition from their people. In 
order to enable themselves to make some explanation, they considered 
it wise and necessar}- to make clear the point concerning the subordi- 
nate staff. 

The general impression was that the traffic manager of any line 
controlled, to a large extent, the whole traffic department of that 
particular line. The reason why the Chinese delegates were now 
referring to the subordinate staff in this connection was because they 
felt certain that the Japanese delegation did not wish to lend color 
to any criticism that while Japan proposed to hand over the railway 
to China, on the one hand, she was still seeking, on the other hand, 
to maintain control over it. Therefore a clause of the kind now pro- 
posed was almost indispensable. Unless he was mistaken, the two 
delegations were agreed so far as the substance of the clause was con- 
cerned. He understood that the Japanese delegation merely did not 
wish to incorporate an express provision regarding the subordinate 
vstaff in this paragraph. 

\ Baron Shidehara stated that the idea was that Japan had no in- 
tention of insisting, as a matter of right, upon the appointment of 
Japanese nationals to posts other than the two agreed upon. It was 
a mere question of convenience. Other foreigners than Japanese 
might just as well be appointed as members of the subordinate staff, 
the ultimate control always remaining with the Chinese managing 
director. Should it be found useful to employ Japanese nationals in 
some posts, the matter might easily be arranged between the Japa- 
nese traffic manager and the Chinese managing director. It did not 
seem necessary, in his opinion, to have any provision at all in this 
respect. When it was simply provided that the two posts specifically 
mentioned were to be filled by Japanese nationals it would not be 
necessary to say that other posts would not be so filled. 

The wording itself seemed to imply that onh^ the posts of traffic 
manager and chief accountant would be held by Japanese nationals. 
He did not see why any further restriction should be needed. The 
Chinese delegates could well explain to their people that it was agreed 
that the positions of traffic manager and chief accountant should be 
filled by Japanese nationals and that the whole matter of the appoint- 
ment of subordinate staff should rest in the hands of the Chinese man- 
aging director. 

Dr. Sze said that the Japanese traffic manager was not to be an 
associate traffic manager with a Chinese coordinate official. There- 



351 ■ ^ ■ ■'■ ■■.... ^■c.:^--.-.--:| 

fore there was apprehension on the part of the Chinese people that 
he might bring with him a big staff of Japanese, so that there might 
be no Chinese under him. If it were not expressly stated, the Japa- 
nese manager might try to fill his office with Japanese nationals. 
Not that he imagined that such would be the Japanese intention, but 
in the case of other roads where there were foreign traffic managers 
there generally were assistant Chinese managers and also all chiefs 
of sections were Chinese. The Chinese delegation wanted to make it 
clear that the same would be the case with the Shantung Railroad, 
and that the appointment of Japanese nationals to the two posts did 
not mean that other posts should likewise be filled by Japanese. 

Baron Shidehara said that it was not at all the case; that even 
those two officials would be under the control of the Chinese man- 
aging director. 

Dr. Sze said that it was clear in the minutes, but he was afraid 
that misunderstanding might arise. 

Baron Shidehara thought it was not necessary to say that all the 
other posts should be filled by Chinese. There was another point to 
which he desired to call the attention of the Chinese delegation. In 
the Chinese draft it was said that a Chinese traffic manager should 
be appointed to assist the Japanese traffic manager. He hoped it 
was understood that this Chinese traffic manager was an assistant 
traffic manager, not having the full authority of a traffic manager. 

Dr. Koo asked if there was any objection to the word " assist." 

Baron Shidehara said that he would suggest saying, for instance, 
" appointment of a Chinese assistant traffic manager, under the 
Japanese traffic manager." It was thoroughly understood that such 
a Chinese assistant traffic manager might be appointed only for a 
period of two and a half years. Of course, if China exercised her 
option of redemption at the end of five years, this agreement in re- 
gard to the appointment of the Chinese assistant traffic manager 
w^ould cease to be effective. Unless such option were exercised and 
China gave notice of redemption, he was to be automatically dis- 
charged at the end of that period. He would therefore suggest the 
following wording for that part of the Chinese draft : 

" It being understood that after two and one-half years from the 
date of the transfer of the railway to China, the Chinese Government 
may appoint an assistant traffic manager of Chinese nationality, 
under the Japanese traffic manager, for the period of two and one- 
half years, and that such Chinese assistant traffic manager may also 
be appointed any time after notice of redemption is given." 

Dr. Koo said that that showed that the Japanese delegation at- 
tached great importance to the post of traffic manager. The Chinese 
idea was that if a Japanese traffic manager was considered necessary 
for the interests of 3.000 Japanese in iShantung it would be much 
more the case for the interests of 30,000,000 Chinese people in the 
same Province. In order to make any satisfactory explanation to 
them it would be all the more necessary to expressly provide that 
the subordinate staff of the traffic manager should consist exclusively 
of Chinese nationals. That would serve to diminish the effect whick 
would be produced upon the Chinese feeling by giving the control of 
the traffic department to a Japanese national. 

Baron Shidehara thought he had made the Japanese position 
sufficiently clear in that respect The traffic manager was to be under 



352 

the control of the Chinese mana^in<r director and there could pos- 
sibly be no inference that Japan was to control the railway itself. 

Dr. Koo said that the Japanese delegation, howeA'er, seemed to con- 
sider the post of the traffic manager so important as to insist upon 
saying Chinese " assistant " traffic manager. 

Baron Shidehara thought it was not necessary to revert to old 
questions discussed over and over again. Japan certainly placed 
much importance upon the question of Japanese traffic manager, who 
should be empowered to exercise the ordinary functions of a traffic 
manager to the full extent. 

Dr. Koo said that the ]Doint he wished to emphasize was that the 
provision regarding the subordinate staff of the traffic department 
was necessar}^ in view of the fact that the traffic manager was to be a 
Japanese national. He had supposed that such an express provision 
would be to the advantage of Japan, too, because it would serve to 
remove ground for popular apprehension that the traffic department 
would be in entire control of Japanese nationals. 

Dr. Sze said the matter was well understood and the Chinese dele- 
gation was only proposing to put it in a written form and was not 
asking for anything new. 

Baron Shidehara said that he had never understood that this 
question of the composition of the traffic manager's staif should be 
defined in the agreement itself. When it was provided that a Japa- 
nese traffic manager was to be appointed there was no reason to infer 
that all his staff would be Japanese. He wondered what reason 
there could be for any such inference. The Chinese delegation could 
well explain that it was only these tAvo posts to which Japanese 
nationals were to be appointed. 

Dr. Koo said that, as Dr. Sze had just stated, the Chinese dele- 
gation was bringing out nothing new. It was an understanding 
which was part of the agreement. It was upon that basis that the 
Chinese delegates had agreed to the whole arrangement. 

Mr. Hanihara said that, according to this draft proposed by the 
Chinese delegation, it was very clear that the Japanese traffic man- 
ager should be under the entire control of the managing director. 
Supposing the Japanese traffic manager wanted to have Japanese na- 
tionals put in some posts, he could not do anything if the manag- 
ing director said " Xo." It seemed perfectly clear that whenever 
he wanted to do something it must be approved by the managing 
director. Kot only was there no necessity of any such express pro- 
vision, but it appeared to him that such a clause would give a very 
undesirable impression. It might be taken as a sort of exclusion 
clause. It would not be necessary, because if the Chinese manag- 
ing director did not think it advisable to employ any Japanese he 
could just say so. If he thought it advisable he could say so, too. 
It was not at all necessary to put restriction upon that point, because 
the Japanese traffic manager could not act independently of the 
Chinese managing director. 

Dr. Koo said that the provision in question was only part of the 
whole paragraph. The first part of that paragraph dealt with the 
exclusion of theXIhinese traffic manager and the inclusion of a Japa- 
nese traffic manager. To counterbalance the first part, it was neces- 
sary to say that the subordinate staif should be composed exclusively 
of Chinese nationals. 



353 

Mr. Hanihara said that it was a Chinese railway; that it Avas 
under the Chinese control. Whomever China employed must be 
Chinese employees, no matter whether they were Japanese, British, 
or American nationals. 

Dr. Koo said that as a matter of fact a question of this kind hardly 
occurred in any other country. In an ordinary case both the chief 
accountant and the traffic manager could safely be left to the Gov- 
ernment of the country in which the railway operated. This was 
an abnormal case, and if the Japanese attached importance to the 
post of traffic manager and insisted upon inserting an express pro- 
vision therefor in the ..treaty, he did not see why there should not 
be another provision (resricting> the subordinate staff. 

Dr. Sze said he uncTefsfood^hat there was an agreement in sub- 
stance between the two delegations, but that his Japanese friends 
only objected to the repetition of a matter well understood. 

Mr. Hanihara said that the Japanese objection was not confined 
to that point only. To his mind this clause carried an inadvisable 
impression. It was a clause for the exclusion of Japanese nationals. 

Dr. Sze said that the Chinese delegation might equally raise dif- 
ficulty in regard to the clause concerning the traffic manager. . 

Baron Shiclehara said that in her ordinary railway loan agree- 
ments China had already agreed that the traffic manager and chief 
accountant should be appointed upon recommendation of foreign 
capitalists. In the present agreement nothing of the kind was 
stated about the appointment of the traffic manager. It was rather 
a concession on the part of Japan. 

Dr. Sze said that it contained a limitation upon the appoint- 
ment of the Chinese traffic manager. What Baron Shidehara called 
" concession " was not in fact a concession but a limitation. 

Baron Shidehara said that they were talking about the subordi- 
nate staff. 

Dr. Sze said that he had been talking of the limitation placed upon 
the appointment of the Chinese traffic manager. 

Baron Shidehara wondered if the clause concerning the assistant 
traffic manager was objectionable to the Chinese delegation. 

Dr. Sze said that the Japanese delegation objected to Dr. Koo's 
draft and proposed to substitute it with their formula. 

Baron Shidehara said that the two drafts were practically of the 
same meaning on that point. The Chinese traffic manager was under- 
stood to be an assistant traffic manager. 

Dr. Koo asked if the Chinese delegation was to understand that 
the Japanese delegates did not wish to have this clause included in 
the agreement. 

Baron Shidehara said that, as Mr. Hanihara had just stated, the 
Japanese delegation thought the insertion of that kind of exclusion 
clause would create a bad impression. They did not want to have 
such express understanding recorded even in the minutes of these 
proceedings. It was, of course, understood that the members of the 
subordinate staff should be appointed by the Chinese managing 
director, but he and his colleagues could not see their way to agree 
to any arrangement by which Japanese nationals should be excluded 
expressly from the service of the railway, even in a subordinate 
capacity. 



354 

Dr. Sze said that he thought Japan was not claiming more than 
those two posts. 

Mr. Hanihara said that the Japanese position was that they did 
not desire to stipiihite anything that might exclude Japanese. 

Dr. Sze thought that the two things seemed inconsistent with each 
other. 

Baron Shidehara observed that when it was stated that the traffic 
manager's staff should consist exclusively of Chinese, except the 
manager's personal clerical staff, it was a kind of exclusion clause. 
While Japan did not insist as a matter of right that the Japanese 
nationals should occupy subordinate posts, Japanese nationals might 
be appointed in practice to some posts in the traffic department. The 
matter could be left to common sense. 

/ Dr. Koo said that if the Japanese delegates considered the last 
clause as in the nature of an exclusion clause, it must be pointed out 
that it was only a sequence of the first part of the paragraph. If 
there were to be no exclusion of Chinese nationals to the post of 
traffic manager, the clause could be omitted. The Chinese delegates 
were willing to agree, if the whole clause w^as to be eliminated. 

Baron Shidehara said that Japan did not intend to insist upon 
subordinate posts being filled by Japanese. There could be no infer- 
ence at all of that kind. She ha,d no intention of insisting upon the 
appointment of her nationals to subordinate i^osts in the service of 
the railway. 

Dr. Sze asked if by '' insisting " was meant " asking.-' 

Baron Shideliara said that there was no intention of insisting or 
claiming as a matter of right. 

Dr. Sze said that, as far as he could see. the Japanese objection 
was merely in the point of drafting. 

Dr. Koo asked if he was to undestland that his Japanese colleagues 
objected to the phrase '' except the personal clerical staff, etc.," as 
conveying the idea of exclusion. 

Baron Shidehara said that it was not so. They preferred elimina- 
tion of the whole clause regarding the subordinate staff, the whole 
latter part of the Chinese draft. He wondered how the following 
would strike the Chinese delegation : 

" It is further understood that the entire subordinate staff of the 
traffic manager should be appointed by the said Chinese managing 
director." 

Dr. Sze said that it might give the inference that the Chinese 
managing director had no power in regard to other departments. 

Baron Shidehara said that that was, of course, understood, but if 
it was said that the subordinate staff should be appointed by the 
managing director there would be no fear that the Japanese traffic 
manager would carry with him a large Japanese staff. 

Dr. Koo thought that the Chinese understanding as stated here 
was correct. He did not understand why the Japanese delegation 
found it difficult to accept the wording in this respect, which was 
proposed for the same reason as they had in proposing their modi- 
fication concerning the wording about the Chinese traffic manager. 
If they would accept the Chinese wording in the latter respect, the 
Chinese delegates would be ready to agree to the Japanese point of 
view in regard to the subordinate staff. The two delegations had 



355 

much the same difficulty on their respective points. As to the under- 
standing that the appointment of the Chinese traffic manager was to 
terminate at the end of two and a half years if there should be no 
redemption, the Chinese delegation was ready to agree. 

Baron Shidehara wondered what modified draft the Chinese dele- 
gation would suggest on the other points. 

Dr. Koo said that the modified draft would read the same, except 
that what occurred in the middle of the latter part of the whole 
paragraph would be omitted, and that the matter suggested by Baron 
Shidehara regarding the period of appointment of the Chinese 
traffic manager would be added. 

Baron Shidehara said that he thought it was not the Chinese in- 
tention that the Chinese traffic manager should have the same author- 
ity as the Japanese traffic manager. 

Dr. Koo said that the phrase " to assist the Japanese traffic man- 
ager " was used advisedly. In the case of the chief accountant the 
word " cooperate " was used. 

Baron Shidehara thought it was understood that the Chinese 
traffic manager was not to have the same functions as the Japanese 
traffic manager. 

Dr. Sze said that he was not to be in the same position as an asso- 
ciate traffic manager. 

Baron Shidehara wondered why in that case there should be any 
difficulty to use the words " assistant traffic manager." 

Dr. Koo thought the Chinese way of putting it would be less ob- 
jectionable, although in substance the two delegations were quite 
agreed. The Chinese difficulty in this point was the same as the 
Japanese difficulty in regard to the subordinate staff. In the latter 
point the two delegations were also agreed, but the Japanese dele- 
gation did not desire to express it the way the Chinese delegation 
proposed. 

Baron Shidehara suggested omitting the phrase "under the Jap- 
anese traffic manager " from the Japanese draft. 

Dr. Koo said that since the hour was getting late he hoped that 
the Japanese delegation would accept the Chinese wording in regard 
to the traffic manager, and he and his colleagues would agree to omit 
reference to the subordinate staff, while recording both understand- 
ings in the minutes. 

Baron Shidehara said that in any case it was getting too late and 
that the matter might perhaps be postponed until to-morrow. 

Dr. Koo asked if the matter might be considered as agreed upon. 

Baron Shidehara asked what the Chinese idea was. 

Dr. Koo said that it was that the Chinese wording concerning traf- 
fic manager should be accepted and that reference to the subordinate 
staff should be left out. 

Baron Shidehara proposed to say " Chinese assistant traffic man- 
ager," and then to state in the minutes that Japan had no intention 
of claiming the appointment of Japanese nationals as members of 
the subordinate staff on the railway. 

Dr. Koo said that as to the subordinate staff the Chinese delega- 
tion had already accepted Baron Shidehara's modified draft read- 
ing, " It being further understood, etc." The Chinese understanding 
was that the said staff would be composed entirely of Chinese na- 
tionals. 



Baron Shidehara said that the Japanese delegation could not 
agree even in the minutes that the entire subordinate staff should be 
composed of Chinese nationals. They could simply say that Japan 
had no intention of claiming the appointment of her nationals to 
subordinate posts. Such appointment, however, must be left to the 
Chinese managing director. Japan had no intention to make any 
such claim as a matter of right. 

Dr. Sze said that was liable to be misunderstood. He thought 
Japan did not expect such appointment either. 

Baron Shidehara said that it was not a question of right but only 
one of convenience. The matter could very Avell be arranged be- 
tAveen the Chinese managing director and the Japanese traffic man- 
ager. He expected, hoAvever, that Japanese nationals would be ap- 
pointed to certain posts outside the personal clerical staff of the 
Japanese traffic manager. 

Dr. Sze said that Baron Shidehara was stretching the meaning. 
The Chinese delegation had no such idea. 

Baron Shidehara said that the position of the Japanese delegation 
was that it Avas not advisable to provide here expressly that Japanese 
nationals Avould be emplo3^ed only upon the clerical staff. 

Dr. Koo asked if he understood that the Japanese delegation did 
not Avish any clause expressly debarring the Japanese subjects from 
being employed on the subordinate staff, although they would under- 
stand that because the traffic manager Avas a Japanese it did not 
necessarily mean that Japanese nationals should be enlisted in his 
staff. 

Baron Shidehara said that Japan had no intention to claim the ap- 
pointment of her nationals to the subordinate staff. 

Dr. Koo said that in that case the Chinese delegation Avould meet 
the Japanese point of vicAv and yield on this question, and simply 
say, " Japan has no intention of claiming the appointment of Japa- 
nese nationals to the subordinate staff." 

Baron Shidehara asked if Dr. Koo proposed to insert that in the 
treaty. 

Dr. Koo said that the Avhole thing w^as intended to be recorded in 
the minutes. 

Baron Shidehara said that the clause relating to the assistant traffic 
manager Avas to be incorporated in the treaty, and the understanding 
that Japan had no intention of claiming the appointment of Japanese 
nationals as members of the subordinate staff was to be recorded in 
the minutes. 

Dr. Koo said that he must frankly state that the Chinese delega- 
tion did not especially like to haA^e the privilege of having that other 
clause about the traffic manager inserted in the treaty itself. They 
should like to have that relegated to the minutes also. 

Baron Shidehara asked if it was the Chinese proposal to have the 
draft end at " removable for cause." 

Dr. Koo ansAvered in the affirmative. 

Baron Shidehara agreed. 

He remarked that when he had said that Japan had no intention 
of claiming, it meant that she had no intention of claiming as a 
matter of right. 



357 

Dr. Koo said that as a matter of course the Japanese Government 
had no right to claim such appointment, after the railway had been 
transferred to China. 

Dr. Sze said that it might be a matter of redundancy, but he 
would point out that the same thing applied to the chief accountant's 
office. He thought the matter went without mentioning. 

Baron Shidehara said that the office of the chief accountant was 
different. There were to be two men at the head of the depart- 
ment. 

Dr. Koo said that the appointment of the subordinate staff was in 
any case to be made by the Chinese managing director. It might 
not be necessary to enter into discussion on that point. 

Baron Shidehara agreed. 

Dr. Koo, regarding that part of the Chinese draft wdiich dealt 
with the chief accountant, suggested changing the original wording 
to " to be a chief accountant with the same functions as a Chinese 
chief accountant." 

Mr. MacMurray suggested "to be chief accountant jointly with a 
Chinese chief accountant, with coordinate functions." 

Baron Shidehara said that the phrase " removable for cause " was 
rather out of place. 

Dr. Koo said that it was an established legal expression. 

Baron Shidehara said that he knew it was, but the question was 
whether it would be necessary. The matter went without saying. 

Dr. Koo said that in the former part of the paragraph the period 
of appointment was mentioned. If there was no such phrase, it might 
be taken as if such appointment were for the whole period of five 
years. Such a phrase might serve to safeguard the railway against 
misconduct on the part of the Japanese experts. 

Baron Shidehara said that he had no serious objection to the 
phrase. He thought that it was understood the redemption was not 
to be effected with funds borrowed from foreigners ; that China had 
no intention of redeeming her treasury notes with funds raised from 
any foreign source. 

Dr. Koo said that he supposed what Baron Shidehara called 
'' foreign sources " did not exclude Chinese nationals abroad. He 
would say that it was also understood on the Chinese side (and he 
hoped on the Japanese side, too) that after the agreement took effect 
the Japanese railway administration would enter into no agreement 
or contract which would not be capable of being executed before the 
transfer of the railway to China, and that in regard to existing con- 
tracts and other commitments into which the present railway ad- 
ministration had entered and which might conflict with the railway 
interests, the said railw^ay administraton would see to it that ar- 
rangements should be made in time to put an end to them by the 
time the railway was to be taken over by the Chinese Government. 
He was only referring to this matter in order to simplify the process 
of transfer of the railway. 

Baron Shidehara said that he supposed the railway authorities 
would have to buy materials needed for necessary repairs. Otherwise 
the railway could not work. 

Dr. Sze said that it was desired that the Japanese railway au- 
thorities should make due estimates of the requirements of the rail- 



358 

way, so that there might not be too much material left unused at the 
time of the transfer. On the other hand, if there should be special 
contracts with Japanese subjects by which the railway authorities 
had given special rate, it would be necessary to have them stopped. 

Baron Shidehara said that he could, of course, say that the railway 
authorities would not enter into any new contracts which were un- 
necessary or which would prejudice future administration of the 
railway by the Chinese authorities. It was, however, quite evident 
that if there should be any repairs required the present authorities 
could effect them. There was no intention on Japan's part to con- 
clude contracts which would be prejudicial to the interests of the 
railway. As regarded the existing contracts, it was quite a new 
question, which the Japanese delegation had not considered, and they 
did not know what to say on the subject. The matter could very 
well be arranged on the spot at the time of the transfer. 

Dr. Sze said that if there were any contracts by which facilities 
of a particular character were granted to Japanese nationals in dis- 
crimination against other nationals, he assumed that such contracts 
would be ended before the transfer, because the matter involved the 
principle of open door and equal opportunity. 

Baron Shidehara said he could not conceive of any such contracts 
as were against the principles of open door and equal opportunity. 
He then said that the question of period regarding the treasury notes 
Iiad not l^een formally agreed upon yet. He thought that the two 
delegations had yet to agree upon the precise formula regarding the 
transfer of the railway. 

Dr. Koo agreed that there should be another meeting for the pur- 
pose of putting it in a formula. As to the question of period, he 
wondered if there would be any objection to pro rata payment; 
that was to say, the whole period being 15 years, would Japan accept 
one-fifteenth ])ayment yearly for the first five years? 

Baron Shidehara answered in the negative. He said that that 
point had been disposed of. Within the first five years there was to 
be no redem])tion at all. 

Dr. Koo said that there was to be no redemption of the whole 
amount, but perhaps there might be part redemption. 

Baron Shidehara said that no part of the treasury notes could be 
redeemed during the first five years. In regard to the matter of 
security, there was no objection on the Japanese side to making the 
treasury notes secured on the properties and revenues of the railway. 
The Japanese idea was that the valuation of the railway and the 
properties appurtenant thereto was to be made by the Sino-Japanese 
joint commission on the basis already agreed upon. The Chinese 
Government would be at liberty, any time after the report of the 
joint commission was made, to take over the railway and the appur- 
tenant properties on the deposit of Chinese Government treasury 
notes secured on the properties and revenues of the railwayj and run- 
ning for the period of 15 years, but redeemable at the option of the 
Chinese Government at the end of the fifth year, or any time after 
the lapse of five years from the date of the transfer. 

Dr. Koo said that the Chinese delegation understood that there was 
to be no notice of redemption. 



359 

Baron Shidehara said that it was so if the Chinese Government 
were to effect redemption at the end of the fifth year, but after the 
lapse of five years notice must be given for redemption. 

Dr. Koo said that, that being the case, the wording should be " re- 
deemable at the end of five years and at six months' notice any time 
after the lapse of five years from the date of transfer." 

Baron Shidehara said that a draft should be made taking into con- 
sideration the decisions reached on December 14. Eeverting to the 
question of the subordinate staff of the traffic department, he said 
that the Japanese position was that Japan had no intention to claim 
;such appointment as a matter of right. 

Dr. Koo said that the Chinese delegation had not agreed to that. 
If it was said that Japan would not claim as " a matter or right," 
she might claim as " a matter of fact," 

Dr. Sze wondered if Japan intended to claim as a matter of fact. 

Baron Shidehara said that " claim " was not the right word. It 
w^oulcl perhaps be better to say simply " Japan will not insist, etc." 

Dr. Koo said that then Japan would be at liberty to claim. 

Baron Shidehara said that from the beginning he had been saying 
Japan would not claim as a matter of right. On that point he had 
not changed at all. Should Japan make the claim as a matter of 
fact, China could say that Japan had no right to do so. 

Dr. Koo said that if Baron Shidehara said that Japan had no in- 
tention to claim as a matter of right, the Chinese delegation would 
have to say that that assertion was not to be taken as meaning that 
Japan might claim as a matter of fact. 

Dr. Sze said that the Japanese delegation had agreed to one thing 
and then would change the understanding. 

Baron Shidehara suggested stating "Japan has no intention of I 
claiming that China is under obligation to appoint Japanese na- 
tionals as members of the said subordinate staff.^^ 

Dr. Koo agreed with the insertion of the word " any " before j 
" obligation." 

Baron Shidehara said that there was then the question of interest 
on the treasury notes. 

Dr. Koo said that the matter could be settled here. 

Baron Shidehara said that the two delegations had no knowledge 
of the cui-rent rate of interest. 

Dr. Koo said that in any case the question of interest could not be 
settled so hastily. He suggested meeting the next day to discuss 
the matter. 

Baron Shidehara said that even if they were to meet to-morrow they 
€ould not settle the question of interest, because they had no knowl- 
edge of the current rate of interest. 

Dr. Koo said that his delegation was not in a position to say if 
they would agree that the matter should be arranged elsewhere. They 
would make a definite answer on the point to-morrow. He would 
now propose to take up the matter of drafting the communication to 
be made to Mr. Hughes and Mr. Balfour. 

Mr. Hanihara desired to point out that the communication was to 
be made simply to Mr. Hughes and Mr. Balfour, and that the two 
delegations were not under any obligation to report the matter to 
the conference. The matter was to be reported to Mr, Hughes and 



360 

Mr. Balfour bocaiise it had been tliroii<j;h their good offices that the 
conversations had been initiated. Whatever they might do with 
the communication rested with them. It might be left to their 
discretion. 

Dr. Koo said that if the two delegations made the communication 
they did so at their own discretion. Mr. Hanihara seemed to have 
the question of obligation in mind. 

Mr. Hanihara said that the point might seem a trivial one, but it 
might have important bearing in Japan. The Shantung negotia- 
tions had been held distinctly apart from the conference. They 
were no part of the general conference. 

Dr. Sze thought Mr. Hanihara's statement interesting, and ap- 
pealed to the American observer for his opinion on the matter. 

Mr. MacMurray said that the Japanese delegation was perfectly 
entitled to say that the conversations here had nothing to do with 
the conference. 

Dr. Sze said that the Chinese understanding was otherwise. 

Mr. MacMurray did not think Dr. Sze had any right to say so. 

Dr. Koo said that he understood Mr. Hanihara to consent to the 
two delegations making the report to Mr. Hughes and Mr. Balfour, 
leaving them to do with the report whatever they liked. 

Baron Shidehara wondered what Dr. Koo's idea was, whether he 
meant that the text of the treaty should be communicated to them. 

Dr. Koo said that it was not his intention. His idea was that all 
the understandings the two delegations had reached should be com- 
municated to them in order to show them what had been accom- 
plished here. 

Baron Shidehara wondered if they did not practically amount to 
the text of the proposed treaty. 

Dr. Koo thought there were two steps to be taken in this connec- 
tion. The first was that, Mr. Hughes and Mr. Balfour being anxious 
to know the results of the negotiations, the substance of the agree- 
ments reached was to be reported to them without waiting for the 
final draft. Then, as a next step, when the final agreement was 
reached, it would be communicated to them again. 

Mr. Hanihara said that the Japanese delegation had no objection 
to the substance of the agreement being so communicated. But as 
to the text of the treaty, the Japanese delegation was hot in a posi- 
tion to submit it to anyone before submitting it to their Government. 

Dr. Koo said that the communication of the substance was an- 
other matter than the communication of the text. 

Mr. Hanihara agreed on that point. 

The meeting adjourned at 10 p. m. 

Washington, D. C, January 30^ 1922. 



THIRTY-FIFTH MEETING. •.. 

The thirty-fifth meeting, held in the governing board room, the 
Pan American Union Building, Washington, D. C, at 10 o'clock 
in the morning, Tuesday, January 31, 1922. "" "~ 



361 

PEESENT. 

China. — Dr. Sao-Ke Alfred Sze, Dr. V. K. Wellington Koo, Dr. 
Chung Hui Wang. Secretaries : Mr. Hawkling Yen, Mr. T. C. Yen, 
Mr. T. Y. Tsai, Mr. T. F. Hsu, Mr. C. H. Zee, Mr. Chuan Chao, 
Mr. T. H. Koo. 

Japan. — Baron K. Shidehara, Mr. M. Hanihara, Mr. K. Debuchi. 
Secretaries: Mr. S. Sabiiri, Mr. E. Kimura, Mr. H. Saito, Mr. T. 
Shiratori. 

Also present as observers : 

The United States of America. — Mr. John Van A. MacMurray, 
Mr. Edward Bell. 

The British Empire. — Mr. M. W. Lampson, M. V. O.; Mr. F. 
Ashton-Gwatkin. 

TRANSFER OF THE RAILWAY. 

Baron Shidehara said that he had just prepared a draft of the 
article concerning the Tsingtao-Tsinanfu Eailway which he thought 
covered all the points which had been discussed here. He read the 
. draft, as follows : 

" Japan shall transfer to China the Tsingtao-Tsinanfu Railway 
and its branches, together with all the properties appurtenant there- 
to, including wdiarves, warehouses, ancl other similar properties. 

'* China, on her part, undertakes to reimburse to Japan the actual 
value of the railway properties mentioned in the preceding para- 
graph. The actual value to be so reimbursed shall consist of the 
sum of 53,406,141 gold marks (which is the assessed value of such 
portion of the said properties as was left behind by the Germans), 
or its equivalent, plus the amount which Japan, during her ad- 
ministration of the railway, has actually expended for permanent 
improvements on or additions to the said properties, less a suitable 
allowance for depreciation. It is understood that no charge will be 
made Avith respect to the wharves, warehouses, and other similar 
properties mentioned in paragraph 1 of this article, except for such 
permanent improvements on or additions to them as may have been 
made by Japan, during her administration of the railway, less a 
suitable allowance for depreciation. 

" The Government of Japan and the Government of China shall 
each appoint three commissioners to form a joint railway commis- 
sion, Avith poAvers to appraise the actual value of the railway prop- 
erties on the basis defined in the preceding paragraph, and to ar- 
range the transfer of the said i^roperties. 

" Such transfer shall be completed as soon as possible, and, in 
any case, not later than nine months from the date of the coming 
into force of the present agreement. 

" To effect the reimbursement under paragraph 2 of this article, 
China shall, simultaneously with the completion of the transfer 
of the railAvay properties, deliver to Japan Chinese Government 
treasury notes, secured on the properties and revenues of the rail- 
way, and running for a period of 15 years, but redeemable at the 
option of China at the end of five years from the date of delivery 
of the treasury notes, or at any time thereafter upon six months' 
preA'ious notice. 



362 

" Pendintr the redemption of the said treasury notes, the Chinese 
Governmen't Avill select and appoint, for so long a period as the said 
notes remain unredeemed, a Japanese subject to the post ot trathc 
manager and another Japanese subject to be chief accountant ]C)jntly 
with The Chinese chief accountant with coordinate functions. These 
officials shall all be under the direction, control, and supervision of 
the Chinese manairing director and removable for cause. 

" It is understood that the redemption of the said treasury notes 
«hall not be effected Avith funds raised from any foreign source. 

'' Terms of financial technicality relating to the said treasury notes, 
not provided for in this article shall be separately determined in mu- 
tual accord betAveen the two Governments." 

Dr. Sze reminded Baron Shideluira of his omission of the clause 
previously agreed upon conceniing the joint commission reading,. 
" Should the Joint commission fail to agree," etc. 

Baron Shidehara thought it was going to be left in the minutes. 

Dr. Sze said that Dr. Wang had just told him that it Avas to form 
tlie subject of a note exchange. 

Dr. Koo, referring to Baron Shidehara's draft, said that it was in 
general acceptable to the Chinese delegation, embodying as it did 
what had substantially been agreed upon before. He Avould, however, 
suggest a feAV modifications. 

With regard to the clause concerning the railway commission, he 
thought that the original understanding Avas for it to form part of a 
note exchange. He took it, hoAveA'er, that Baron Shidehara noAV 
desired to have it inserted in the treaty. 

Baron Shidehara said that he did, because there were meA^eral other 
cases concerning Avhich another commission Avas provided for, such, 
for instance, as that concerning the transfer of the administration of 
the KiaochoAv leased territory. His idea Avas to form tAvo commis- 
sions — one for the raihvay and another for all other matters requiring 
adjustment. He therefore thought it better to insert the clause in 
question in order to shoAv that there Avere two distinct commissions. 

Dr. Koo said that he was ready to accept Baron Shidehara's idea. 

Then, regarding the phrase, " with powers," etc., he thought that 
it implied only the valuation of improA^ements and additions and the 
determination of Avhat constituted such, and that it Avas not thereby 
meant that the properties formerly belonging to Germany should be 
A^aluated by the commission. 

Baron Shidehara said that the last-mentioned matter was defined 
in paragraph 2, and that therefore the commission would have nothing 
to do Avith that. 

Dr. Koo. referring to the phrase, " these officials," etc., said that the 
preceding day they had spoken of three officials. He supposed that 
"these officials" here referred more particularly to the Japanese 
traffic manager and chief accountant. 

Baron Shidehara answered in the affirmatiA^e. However, he had 
no objection to saying " three officials." 

Dr. Koo said, regarding the clause concerning the source of funds 
for the redemption of the treasury notes, -he had no objection, as the 
matter had substantially been agreed upon the day before. He won- 
dered, however, if by " raising funds " Baron Shidehara meant: 
" floating loan." 



363 

Baron Shiclehara answered that his wording was broader in mean- 
ing.. There were foreign banks at Shanghai, Tientsin, and elsewhere 
in China. If China were to get funds from them, no matter 
whether in the form of loans or by some other simpler arrangement, 
that would be raising funds from a foreign source. 

Dr. Koo said that in any case the phrase " any foreign source " 
was to mean " any source other than Chinese." He would suggest, 
moreover, that the whole clause should be recorded in the minutes 
instead of being left in the body of the treaty, for, obviously, it im- 
plied restriction of freedom for China to raise funds from a foreign 
source and it did not appear necessary to have the clause inserted in 
the treaty. 

Baron Shiclehara said that so long as the matter was clearly un- 
derstood he didn't care much about the form it should take. 

Dr. Koo said that the phrase "terms of financial technicality," 
occurring in the last paragraph, seemed rather broad. What was 
meant here was only " details." 

Baron Shidehara said that it was " financial details." 

Dr. Koo said, " financial details of a technical character." 

Baron Shidehara wondered if " financial details " did not suffi- 
ciently cover Dr. Koo's point. 

Dr. Koo said that " details," so long as they referred to the treas- 
ury notes, would naturally be of a financial character. He would 
therefore suggest simply saying "technical details;" it was simply 
a form of expression which would be less objectionable, from the 
Chinese point of view, than the one adopted by Baron Shidehara. 

Baron Shidehara said he would like to say, " financial details." 
The matter, of course, concerned the treasury notes, but it was not 
simply a form of expression, for he meant the question of interest 
to come under that heading. The question of what form the treas- 
ury notes should take was only a question of a technical nature, but 
when he said " terms of financial technicality," he meant the phrase 
to cover the question of interest, etc. 

Dr. Koo said that in that case the wording " financial details of 
a technical character " might be adopted. 

Baron Shidehara wondered if " technical character " was needed 
there. 

Dr. Koo said that the idea was to avoid any misapprehension. 
The wording-suggested by him could cover the question of interest. 
If Baron Shidehara had no serious objection, he would like to have 
the modifying phrase added. 

Baron Shidehara agreed. 

Dr. Koo said that in the last paragraph he would also suggest 
omitting the word "separately" and adding at the end a phrase 
^rhich would imply a time limit, such as " as soon as possible, and, in 
any case, not later than six months from the date of the coming into 
force of this agreement." He thought six months would be long 
enough for the purpose, and at the same time it would give ample 
time to China to prepare the treasury notes for delivery. 

Baron Shidehara wondered if it was important to have a time 
limit fixed in this respect, because in paragraph 4 it was provided 
that the transfer of the railway properties should be completed 
within nine months. It seemed to him, therefore, that the ultimate- 



364 

period had already been fixed. By the time the transfer of the rail- 
wa^^ -was completed, the financial details would, of course, have to 
be finished. 

Dr. Sze said that the printing of the treasur}' notes took much 
time, and so he hoped that the Japanese delegation would agree that 
in case the printing was delayed eTapan should accept provisional 
scrip. 

Baron Shidehara said it was really a matter of detail, and while he 
liad no knowledge about such a matter, he would not object to Dr. 
Sze's suggestion. 

Dr. Sze said that such provisional scrip would be exchangeable 
at the time when tlie printing of the treasury notes was finished. 

Baron Shidehara said that in that case there seemed no reason why 
a special time limit should be provided for in the last paragraph. 

Dr. Koo said the idea was that it might not be altogether easy to 
come to an understanding on the financial details concerning the 
treasury notes. Were it to be understood that the transfer of the 
railway was to be carried out within nine months independently of 
these details, it might not be necessary to fix a time limit for the 
negotiation of financial details. 

Baron Shidehara said it was, of course, understood that the treas- 
ury notes should be delivered at the time of the transfer of the rail- 
way, which was not to be later than nine months from the date of the 
coming into force of the agreement. 

Dr. Koo said that it was possible that the financial details should 
not be agreed upon within that period; he might be overcautious, 
perhaps. 

Baron Shidehara thought he was. 

Dr. Koo was glad that Baron Shidehara thought so; because much 
rested with the Japanese side. At any rate, the Chinese delegation 
thought that the fixing of a time limit would make the whole process 
much easier, and that six months would appear to be ample time for 
that purpose, while leaving enough time for the liquidation of the 
railway. 

Baron Shidehara said that in any case it was not a very important 
matter either for Japan or for China. 

Dr. Koo said that it might be best to have a provision to forestall 
any difficulty that might arise in this connection. 

JBaron Shidehara said that the fixing of a particular period might 
be favorable or unfavorable to China, for the rate of interest fluc- 
tuated constantly. 

Dr. Koo said the chances were equal. 

Baron Shidehara asked if it was the Chinese idea to have three 
months before the delivery of the treasury notes. 

Dr. Koo said he would not say exactly three months; the nine 
months stipulated for the transfer of the railway represented the 
maximum period. The present time limit simply provided sufficient 
margin between the transfer of the railway and the delivery of the 
treasury notes, so that if the transfer could be made before the end of 
nine months the transaction could be clear-cut and complete. 

Baron Shidehara agreed. He expressed gratification that the crux 
of the whole Shantung question had thus been disposed of. 

Dr. Koo shared the gratification. 



365 

Mr. Hanihara expressed appreciation of the part the British and 
American observers had taken in the settlement of the question. 

The observers heartily joined in the general gratification. 

Baron Shidehara said that the date of the transfer of the admin- 
istration of the Kiaochow leased territory and of public properties 
therein remained to be fixed. He would propose a period of six 
months. 

Dr. Koo said that that appeared to be rather too long; he thought 
it would be advisable for both Japan and China to curtail this 
period as much as possible. 

Baron Shidehara said it was certainly the Japanese intention, 
but the question was one of practicability. The transfer of public 
properties would itself take a long time. There had, moreover, been 
:so many administrative offices established with public properties 
attaching to each of them that it would be safer to provide sufficient 
time. He was really afraid that even a period of six months would 
not be long enough. There was, however, no intention on the 
Japanese side unnecessarily to prolong the transfer. From the esti- 
mate taken by Japan, six months was absolutely necessary; if the 
transfer should be found possible before that period, it would be so 
much the better. 

Dr. Koo said that the whole Shantung question had exercised the 
minds of the Chinese people, and the Chinese delegation therefore 
desired to settle the matter as early as possible, so that any misap- 
prehension now existing in China might be set at rest. It was very 
desirable that the. period of transfer should be shorter, so that there 
might be no ground for misconception. It would be the more so 
because the Chinese delegation felt that Japan would be ready to do 
everything possible to expedite the transfer. 

Baron Shidehara said that the proposed period had not been fixed 
in an arbitrary manner. The opinion of the authorities in Tsingtao 
had been consulted; they had said that it was not possible to fix a 
shorter period, while of course they would do their best to ex- 
pedite the transfer. The Japanese delegation was only relying upon 
the opinion of the people on the spot. He and his colleagues didn't 
think six months would be at all too long. 

Dr. Koo said there would, however, be an additional period be- 
tween the signing of the treaty and its coming into force. Since 
Japan intended to turn over the leased territory the necessary prep- 
arations would be started immediately upon the treaty being signed 
without waiting for its coming into force. 

Baron Shidehara said that the commissions of China and Japan 
could not meet before the coming into force of the present treaty. 
In preparing the transfer of the leased territory the two commis- 
sions had to act in cooperation. 

Dr. Koo said that while it was so, the process of preparation could 
be begun before their meeting. 

Baron Shidehara said that the Japanese authorities would make 
all preparations possible, but he and his colleagues did not want 
to make a provision which in practice could not be carried out. 
There was no reason for Japan to delay the transfer, but if special 
provision was to be made in the treaty, Japan must naturally have 
sufficient margin. 

93042—22 24 



366 

-Dr. Koo said that there was no doubt about the Japanese intention. 
He was only thinking of the elt'ect the matter Avould have upon the 
minds of the Chinese people at large. Should there be any mis- 
apprehension on their part, it would not be fair to Japan's inten- 
tions. 

JBaron Shidehara said that nobody would think six months too 
long. As he had stated, the Japanese delegation had consulted the 
opinion of the men in charge on the spot. They had said that any 
shorter period Avas not practicable. The transfer was not, of course, 
to be made all at once, but it would have to be effected in part. Part 
transfer would, of course, be made at an early date. 

Dr. Koo understood that the Japanese delegation took six months 
to be the maximum period and thai Japan had no intention of un- 
necessarily delaying the transfer. Not wishing to part from their 
policy of expediting the matter, the Chinese delegation was ready 
to accept the period, provided it should be recorded in the minutes 
that Japan would do everything to expedite the transfer and that 
necessary preparations would be made before the commissions met, 
so that the actual transfer might be made as soon as possible. More- 
over, he would have the Avords ''and adjustment" after the word 
'' transfer " in the formula adopted before on this question. 

Baron Shidehara said that he had no objection to having the 
understanding referred to by Dr. Koo recorded in the minutes. 
At the same time he hoped that China, on her part, would make all 
necessary preparations for receiving the transfer. China would, 
for instance, have to provide the necessarjr personnel for the purpose. 
If, Avhen the Japanese authorities Avere ready to hand over a certain 
administrative office, China should say that she had no sufficient staff 
ready for the office, that would protract the transfer. 

Dr. Koo agi"eed. 

Baron Shidehara said that as to the adding of the words "and 
adjustment " he would think that the most important thing was 
the transfer of the administration and of public property. 

Dr. Koo said he recalled saying that there might be other matters 
equally requiring adjustment. It had been agreed to make the draft 
read "the said transfer and adjustment, etc.," making "and adjust- 
ment " dependent upon the period of transfer to l3e fixed. Six 
months being a long period, he would now propose to let that phrase 

StAJ. 

He recalled, also, that there were one or two points on which 
the Japanese delegation had agreed ad referendum. One of them 
was the transfer of. telephones in Tsingtao, and the other Avas con- 
cerning the transfer of public properties, coming under the head- 
ing "B" in the Japanese proposal. 

Mr. Hanihara said that time being up, he would suggest leaving 
the matter to the drafting meeting. 

Dr. Koo wished to be informed of the decisions reached by the 
Japanese GoA^ernment on those two points. 

Mr. Hanihara said that the Japanese Government generally 
agreed, but that there was a question of wording about those matters. 

Dr. Koo asked if the Japanese Government agreed to hand over 
those public properties without charge and if the same applied to 
telephones. 



367 

Baron Shidehara said that it was so. He would, however, point 
out that of course the question of improvements and additions came 
in. Charges would be made for these, minus allowance for de- 
preciation. 

Dr. Koo asked if Baron Shidehara referred to improvements- 
effected by Japan on those properties. 

Baron Shidehara said he referred to improvements upon and 
additions to them. 

Dr. Koo said that the matter was now to be considered as agreed, 
only the question of wording remaining to be settled. As regarded 
the telephone, the Japanese delegation had agreed, at the eighth 
meeting, to turn them over to China ad referendum, as Mr. Hanihara 
had put it. 

Mr. Hanihara said that it would be turned over to China subject to 
the same conditions as public properties; that was to say, improve- 
ments and additions should be paid for. 

Baron Shidehara said that, according to the minutes, the follow- 
ing seemed to have been agreed upon : 

" As regards the telephone enterprise Avhich is to be handed over 
to the Chinese Government, the Chinese delegation give an assurance 
that the Chinese Government will give due consideration to requests 
from the foreign community at Tsingtao for such extensions and 
improvements as may be reasonably required by the general inter- 
ests of the public. 

" The Japanese delegation agree to turn over the telephone enter- 
prise to the Chinese Government, subject to confirmation by the 
Japanese Government." 

Dr. Koo said that it was correct; that was to say, the formula was 
to be recorded in the minutes. So, now, the phrase " subject to con- 
firmation, etc.," might be omitted. He pointed out that there was 
also the question of the date in regard to the salt industry. 

Baron Shidehara said that he would suggest a period of six months 
in this respect also. 

Dr. Koo agreed. He said that that completed all dates remaining 
to be fixed. He would now suggest that the conferees should meet 
again in the afternoon to discuss the form of "communication to be 
made to Messrs. Hughes and Balfour. 

Mr. Hanihara said that the matter must be taken subject to the 
understanding that the final drafting had not been finished and that 
the communication represented only the substance of individual 
agreements. 

Dr. Koo said that it was understood and that the final form was 
to be communicated again later on. 

The meeting adjourned at 12 o'clock. 

Washington, D. C, January 31^ 1922. 



SJC-35.] 



January 31, 1922. 



[For the press.] 
[Issued by the Chinese and Japanese delegations.] 

The thirty-fifth meeting of the Chinese and Japanese delegates 
relative to the Shantung question was held in the Pan American 
Union Building at 10 o'clock this morning. An agreement has been 



368 

reached on all essential points in regard to the question of the 
Tsingtao-Tsinanfii Railway and on certain other questions. The 
two delegations will meet again at 5 o'clock this afternoon for the 
purpose of drafting. The meeting adjourned at 12 o'clock. 



THIRTY-SIXTH MEETING. 

The thirty-sixth meeting, held in the governing board room, the 
Pan American Union Building, Washington, D. C,, at 5 o'clock in 
the afternoon, Tuesday, January 31, 1922. 

PRESENT. 

China. — Dr. Sao-Ke Alfred Sze, Dr. V. K. Wellington Koo, Dr. 
Chung Hui Wang. Secretaries : Mr. Hawkling Yen, Mr. T. C. Yen, 
Mr. T. Y. Tsai. Mr. T. F. Hsu, Mr. C. H. Zee, Mr. Chuan Chao, Mr. 
T. H. Koo. 

Japan. — Baron K, Shidehara, Mr. M. Hanihara..Mr. K. Debuchi, 
Secretaries: Mr. S. Saburi, Mr. E. Kimura, Mr. H. Saito, Mr. T. 
Shiratori. 

Also present as observers. 

The United States of America. — Mr. John Van A. MacMurray, 
Mr. Edward Bell. 

The British Empire.— Mr. M. W. Lampson, M. V. O., Mr. F. 
Ashton-Gwatkin. 

DRAFTING. 

Dr. Sze said that Dr. Wang was in charge of the matter of final 
drafting. He would therefore ask Dr. Wang to state the Chinese 
view in regard to the communication to be made to Mr. Hughes and 
Mr. Balfour. 

ARRANGEMENT OF THE AGREEMENT. 

Dr. Wang said that there were two ways of arranging the agree- 
ments arrived at between the two delegations; namely, they could 
be arranged either chronologically or logically. He thought that the 
logical arrangement had better be adopted in the present case. So 
the agreements could be divided into three classes, viz : 

(1) Treaty agreements. 

(2) Annexes to the treaty. 

(3) Understandings to be recorded in the minutes. 

As to the treaty agreements, he would suggest the following order : 

(1) The transfer of the former German-leased territory of Kiao- 
chow. 

(2) Public properties. 

(3) Withdrawal of Japanese troops from Shantung. 
(4^ The maritime customs of Tsingtao. 

(5) The Tsingtao-Tsinanfu Railway. 

(6) The extensions of the Tsingtao-Tsinanfu Railway. 

(7) The mining in Shantung. 

(8) The purchase of the salt industry by China. 



369 

(9) The former German submarine cables and the Japanese wire- 
less stations. 

(10) Vested rights of foreigners. 

(11) Opening of Tsingtao as a self -opened port. 

KENOUNGEMEJSTT OF PREFERENTIAL RIGHTS. 

Baron Shidehara wondered under which head the question of the 
renouncement by Japan of the preferential rights with regard to 
foreign assistance in persons, capital, and material would come. 

Dr. Wang said that that would form a part of the annex. 

Baron Shidehara said that the Japanese position was that, unless 
the matter was expressly stated in the treaty itself, there might be 
room for misunderstanding. 

Dr. Wang said that if that matter were to be inserted in the treaty 
itself the wording would have to be modified. He would suggest 
that the renouncement by Japan should form the subject of a uni- 
lateral declaration in the annex to the treaty. 

Baron Sliidehara said that the question might be raised whether 
those treaty rights possessed by Japan could be renounced without 
being expressly stipulated in the body of the treaty. They were 
rights expressly secured in a treaty form. 

Dr. Koo said the difficulty was that the matter involved legal 
questions which both sides had been conscientiously avoiding. If 
the proposed clause should be inserted in the body of the treaty 
it would at once raise a difficulty which had so far been successfully 
avoided. 

Mr. Hanihara said that there was, however, a great difficulty on the 
Japanese side arising from the construction of laws. No renounce- 
ment of laws or treaties could be made without taking a legal form. 

Dr. Koo said that it was only from the Japanese point of view. 

Dr. Wang said that an annex of a treaty formed part of the treaty 
even when it was a unilateral declaration. 

Baron Shidehara said that in that case there would be no diffi- 
cultv on the Chinese side to have the clause inserted in the treaty 
itself. 

Dr. Wang said that this thing would better be left in the minutes, 
for then there would have to be no reference to the German treaty. 

Baron Shidehara said that, according to Dr. Wang, an annex 
formed part of the treaty. If so, the matter might just as well be 
incorporated in the treaty as in the annex. It could take the form 
of a unilateral declaration by Japan in some such way as " Japan 
declares that she renounces, etc." 

Dr. Koo said that so worded it might be intelligible to the Japanese 
people, but the difficulty was with the public opinion of China. 

Dr. Wang said that the matter could be put in the form of an 
annex in the same way as the Chinese declaration regarding the 
Tsingtao municipality. 

Baron Shidehara said that he did not understand Dr. Wang's point 
of view. He (Dr. Wang) had said that an annex was part of a 
treaty ; if so, what difference did it make. 

Dr. Wang said that what was in the body of the treaty had to be 
agreed to by both parties, but the contents of an annex could be 



370 

unilateral. If in the body of the treaty China would have to express 
consent to what was stated. 

Baron Shidehara said that the matter was not in any case a very 
important one. 

Dr. Wang said that, that being the case, the matter might be put in 
the annex. 

Baron Shidehara signified assent. 

PUBLIC PROPERTIES. 

Baron Shidehara then said that he was rather worried about the 
wording of the agreement concerning public property. The one that 
had been adopted was so complicated that it would be difficult for 
outsiders to understand. He had prepared a draft himself which 
followed the adopted wording as closely as possible, but which he 
hoped might make the meaning clearer. He read the draft, as 
follows : 

" (1) The Government of Japan undertakes to transfer to the 
Government of China all public properties, including land, buildings, 
works, or establishments in the leased territory of Kiaochow, whether 
formerly possessed by the German authorities, or purchased or con- 
structed by the Japanese authorities during the Japanese adminis- 
tration of the said territory, save those indicated in article of 

this treaty. 

" In the transfer of such public properties no compensation will be 
claimed from the Government of China, except (1) for those pur- 
chased or constructed by the Japanese authorities and also (2) for the 
improvements on or additions to those formerly possessed by the 
German authorities. With regard to cases under these two cate- 
gories, the Government of China shall refund a fair and equitable 
proportion of the expenses actually incurred by the Government of 
Japan for such properties or such improvements or additions, having 
regard to the principle of depreciation and continuing value." 

Then the next article would read thus : 

"(2) It is agreed that such public properties in the leased territory 
of Kiaochow as are required for the Japanese consulate to be estab- 
lished in Tsingtao shall be retained by the Government of Japan, 
and that those required more especially for the benefit of the Japanese 
community, including schools, shrines, and cemeteries, shall be left 
in the hands of the said community. 

" Details of such matters shall be arranged by the joint commission 
provided for in Article of this treaty." 

Dr. Sze suggested taking up other matters while waiting for the 
typewritten draft and said that the transfer of the former leased 
territory of Kiaochow might be taken up. 

Baron Shidehara said that the transfer of the administration might 
be made a separate article. The Chinese delegation had proposed to 
put several things under that heading. 

Dr. Wang said that it might form the subject of a separate article. 
Then, referring to a typewritten copy of Baron Shidehara's draft 
on public properties, he (Dr. Wang) asked if that was going to be the 
final formula. 

Baron Shidehara said the wording regarding the transfer of pub- 
lic properties had not yet been decided upon, not in a final form, at 
any rate. 



371 

Dr. Wang said that the Chinese delegation was prepared to accept 
the draft tentatively, subject to final drafting. He would, however, 
suggest adding the phrases " specified in (1)" and " specified in (2)," 
respectively, after the words " properties " and " additions " in the 
latter part of the second paragraph. 

Baron Shidehara agreed. Then, referring to the agreement con- 
cerning public enterprises, he said that the subject matter belonged 
to such minor details that he would propose to put it in the annex. 
He would suggest the same in regard to the telephone. Only he 
wondered what would be the status of roads, sanitary equipment, etc. 
He understood that a formula had been adopted on that subject. 

PUBLIC WORKS. 

Dr. Wang suggested relegating it to the minutes. He would point 
out the fact that there was a slight difference of wording between 
the formula actually adopted and the one which Baron Shidehara 
had just read. 

Baron Shidehara said that he had not been present at the time when 
the matter had been discussed. He, however, remembered that at a 
later meeting the Chinese delegation had stated that they had given 
assurance that the foreign community at Tsingtao should have fair 
representation in the management and maintenance of public works 
to be handed over to China, while expressing' difficulty regarding 
other public works not so handed over. 

Dr. Wang read from the Chinese minutes wherein the formula in 
question read: 

" The Chinese delegation takes notice of the desire of the Japa- 
nese delegation that, etc." 
instead of: 

" The Chinese delegation gives an assurance that, etc." 

Baron Shidehara said'that he had been referring to what had taken 
place at the meeting of January 13. Perhaps a middle course might 
be taken and the thing put in the annex. 

Dr. Wang said that the formula had been adopted in the form he 
had read because of the Chinese desire that there should be no en- 
croachment upon Chinese sovereignty. Mr. Hanihara had accepted 
it at the time on the understanding that it amounted to an assurance. 

Baron Shidehara suggested making it a continuous declaration 
and putting it in the annex. It was awkward as it stood. 

Dr. Wang said that the Chinese delegation was prepared to put 
it in the annex as a declaration of the Chinese delegation. 

Baron Shidehara said that in that case the formula would read 
" The Chinese delegation declares that in the management, etc." He 
would point out that in the annex " The Chinese delegation " would 
look queer. It ought to be the " Chinese Government." 

Dr. Wang agreed. 

TSINGTAO CUSTOMS. 

Baron Shidehara said that with regard to the agreement on the 
question of the Tsingtao maritime customs, he thought that the 
wording was rather clumsy. He would suggest taking off the two 
understandings therein to put them into the annex. The phraseol- 



372 

ogy adopted in the second and third paragraphs looked as if they 
implied that the office of the Inspector (Teneral of the Chinese mari- 
time customs were not part of the Chinese Government. 

Dr. Wang asked if Baron Shidehara desired to have paragraphs: 
2 and 3 transferred to the annex. 

PROVISIONAL AGREEMENT OF 1915. 

Dr. Koo said that he desired to point out an important point in 
the first paragraph, which read : " Simultaneousl}:' with the resti- 
tution of the leased territory of Kiaochow," etc. His understand- 
ing was that immediately upon the coming into force of the pres- 
ent treaty the provisional agreement of 1915 was to be abrogated 
automatically. The transfer of the leased territory was to be com- 
pleted Avithin six months, so that according to the draft now before 
him it would mean a difference of six months. 

Baron Shidehara asked what Dr. Koo would suggest. 

Dr. Koo said that he would suggest making the agreement read: 
" Immediately upon the coming into forc^ of the present agreement, 
Japan transfers to China the custom-house of Tsinp-tao," etc. 

Baron Shidehara said that the Tsingtao custom-house had always 
been a Chinese custom-house, and there could be no question of 
transfer. 

Dr. Koo said that its administration was in the hands of the 
Japanese staff by reason of the said provisional agreement. He 
would, however, suggest saying : 

"It is agreed that the custom-house of Tsingtao shall completely 
be made an integi-al part of the Chinese maritime customs," etc. 

Baron Shidehara said that according to the Japanese minutes there 
seemed to be no such discrepancy as Dr. Koo had pointed out. 

Dr. Koo said that Mr. Hanihara had agreed that immediately upon 
coming into force of the present agreement the provisional agree- 
ment of 1915 should be abrogated automatically. 

Baron Shidehara said that he had not been present at the time, 
but from the contents of the provisional agreement of 1915 it seemed 
to him entirely logical that the withdrawal of the Japanese troops 
from Kiaochow and the abrogation of the provisional agreement 
should go together. 

Dr. Koo said that the agreement between the two delegations had 
been that as soon as the whole agreement of Shantung took effect the 
provisional agreement should go. 

Baron Shidehara assented. 

Dr. Koo then suggested recording the second and third para- 
graphs in the minutes. 

Baron Shidehara said that it should be put in the annex. ^ 

Dr. Koo said that if that was preferred, the Chinese delegation 
would agree. 

Baron Shidehara said that the provisional agreement could not 
be abrogated by a declaration of the Japanese Government alone. 

Dr. Koo suggested to make the paragraph read: 

" It is understood that the provisional agreement of August 6, 1915, 
between Japan and China relative to the maritime customs office of 
Tsingtao will be abrogated upon the coming into force of the pres- 
ent treaty." 



373 

Baron Shidehara said that it ought to be " cease to be effective "^ 
instead of " abrogated." 
Dr. Koo agreed. 

OPENING OF CITIES IN SHANTUNG. 

Baron Shidehara reminded the Chinese delegation that it had been 
agreed that a declaration should be made by the Chinese delegation 
concerning the opening of cities and towns in the Province of 
Shantung. 

Dr. Koo said that the simplest way would be for the Chinese dele- 
gation to communicate to their Government to the end that the lat- 
ter might make a declaration in this matter. 

Baron Shidehara said that the Chinese Government had several 
times made such a declaration. What he wanted now was that it 
should be actually carried into effect. He desired that a declaration 
should be made in some form announcing the Chinese intention to 
carry out their former declaration. 

Dr. Koo said that the Chinese delegates had suggested that they 
would ask their Government to open such towns. 

Baron Shidehara read from the minutes at some length to show^ 
that the Chinese delegates had pledged themselves to make a dec- 
laration on the matter. 

Dr. Koo said that in any case the matter was not to be introduced 
in the communication to be made to Mr. Hughes and Mr. Balfour. 
The Chinese delegates could perhaps make an official statement and 
publish it in the newspapers. 

Baron Shidehara asked if it woud not be possible for the Chinese 
delegation to send to the Japanese delegation a note embodying the 
statement to be published. 

Dr. Koo said that the Chinese delegation would send a copy of, 
such declaration to them. 

CHEFOO-WEIHSIEN RAILWAY. 

With regard to the Chefoo-Weihsien Railway he would suggest 
putting the understanding between the two delegations in the fol- 
lowing form : 

" It is understood that the construction of the Chefoo-WeihsieiL 
Eailway shall be financed by Chinese capital." 

Baron Shidehara, reading from the minutes, said that the Jap- 
anese delegation had stated that if the said railway was to be con- 
structed with Chinese capital, Japan would raise no difficulty. He 
didn't remember any formal understanding of such nature as men- 
tioned by Dr. Koo. 

■ Dr. Koo said that the roadbed of the railway had been laid and 
the Chinese project had made considerable progress, and it would,, 
therefore, be unwise for the Chinese delegation to appear as if they 
had neglected the matter. The simple sentence he had mentioned 
would very well answer the purpose. 

Baron Shidehara felt there was some difference between the sug- 
gested formula and what he had stated when the question hadh 
come up. 



374 

Dr. Koo thoiifvht that that amounted to the same thing-. 

Baron Shidehara said that the Japanese delegation did not pro- 
pose that the said railway should be constructed with Chinese capi- 
tal. That was purely China's business. 

Dr. Koo asked Baron Shidehara how the following formula would 
strike him : 

" As it is understood that the Chefoo-Weihsien Railway is to be 
constructed with Chinese capital, the Japanese Government will 
raise no objection in this matter." 

Baron Shidehara suggested the following formula: 

" The Japanese Government has no intention of claiming that the 
option for the construction of the Chefoo-Weihsien Railway should 
be thrown open for the common activity of the international jEinancial 
consortium, if that railway is to be constructed with Chinese capital." 

That was the Japanese position. During the German regime a 
contract had been made between the German interests and the 
Chinese Government Avhereby it had been agreed that the railway 
was to be constructed with German capital. Japan had succeeded 
to that right, which, however, she had now no intention to claim. 
In the Japanese note of September 7, of last year, it had been pro- 
posed that the option for the construction of the railway should be 
offered for the common activity of the consortium. 

Dr. Koo asked if Baron Shidehara intended to make that a uni- 
lateral declaration on Japan's part. 

Baron Shidehara said that it was so and that it should be put in 
the annex. 

UNDERSTANDINGS REGARDING TRANSFER OF RAILWAY. 

Dr. Koo agreed. He then said that there were several understand- 
ings with regard to the railway : The first was regarding the Japa- 
nese employees now in the service of the Tsingtao-Tsinanfu Railway, 
The second was regarding contracts the Japanese railway authori- 
ties had concluded or would still conclude. In this latter respect, 
he would suggest the following formula : 

CONTRACTS AND COMMITMENTS. 

" It is understood that, pending the transfer to China by Japan 
of the Tsingtao-Tsinanfu Railway, no new agreements or contracts 
shall be made on that railway by the present administration. 

"As to existing contracts or other commitments, which may con- 
flict with the Chinese railway policy or interests, the present ad- 
ministration shall see to it that their effectiveness cease upon the 
transfer to China of this railway, it being understood that this does 
not prevent Japan from buying materials for making repairs abso- 
lutelj'' necessary to the railway." 

Baron Shidehara said that what Dr. Koo had just read did not 
coincide with what he (Baron Shidehara) had stated. He remem- 
bered stating that Japan would not enter into contracts which would 
be prejudicial to the interest of the railway. He wondered if it was 
the Chinese intention to communicate this to Mr. Hughes and Mr. 
Balfour. Seeing that there were so many items recorded in the 
minutes, it would be extremely difficult to take them all out now. If 



375 

the understandings recorded in the minutes should be communicated 
to these statesmen that had better be done later on. The two states- 
men were especially concerned about the railway, so it might not 
be desirable to communicate to them on matters other than those 
concerning the railway. These other matters might best be left to 
later examination. 

Dr. Koo said that the matter of contracts by the Japanese railway 
authorities concerned the railway. 

Baron Shidehara said that the proposed understanding was, how- 
ever, an entirely new matter as far as the Japanese delegation was 
concerned. 

Dr. Koo said that the wording of the understanding might be a 
little different, having been recast in order to be communicated to 
Messrs. Hughes and Balfour. 

SUBORDINATE STAFF. 

There were some other important points which he would like to 
communicate to Mr. Hughes and Mr. Balfour. One of them was 
the understanding that the subordinate staff of the Japanese traffic 
manager should be appointed by the Chinese managing director. 
Another understanding was that Japan had no intention to claim 
that the members of the subordinate staff of the Japanese traffic 
manager should be appointed from among Japanese nationals. The 
same understanding applied to the entire staff of the Japanese chief 
accountant. 

Baron Shidehara said that the last two understandings could be 
made into one. 

Dr. Koo said that there was also an understanding regarding the 
telegraph administration along the Tsingtao-Tsinanfu Railway and 
another concerning the post offices in Shantung. 

Baron Shidehara saici that it was clearly impossible to communi- 
cate all the understandings recorded in the minutes. He thought the 
three understandings concerning the railway which Dr. Koo had 
mentioned would be enough. 

Dr. Koo said that he would agree on the understanding that other 
points were to be communicated later on. 

COMMUNICATION TO HUGHES AND BALFOUR. 

Baron Shidehara said that it was understood that the communica- 
tion was to be addressed to Mr. Hughes, not as the chairman of the 
conference. 

Dr. Koo asked if. in other words, Baron Shidehara meant that 
the communication should be made separately by the two delegations. 

Baron Shidehara said that if the Chinese delegation preferred, 
he would have no objection to making a joint communication. He 
had just prepared a short covering note which was to the following 
effect : 

" On behalf of the Japanese delegation, I have the honor to inform 
you that the conversations which were commenced early in Decem- 
ber between the Japanese and Chinese representatives, through the 
good offices of yourself and Mr. Balfour, on the question of Shan- 
tung have now come to a successful close. 



376 

" Highly appreciatino:. as I do, the keen interest which you have 
constantly manifested in a satisfactory adjustment of the question,, 
I am particularly pleased to communicate to you herewith inclosed 
the substance of the terms agreed upon respecting various issues in- 
volved in the matter. A treaty on the basis of such terms is in the 
course of drafting. 

" In making this communication to you, I beg to express the sincere 
thanks of my Japanese colleagues and myself for all your friendly 
efforts in bringing together the Japanese and Chinese delegations 
with such a happy result." 

He wondered if the Chinese delegation Avould agree to address to 
Mr. Hughes and Mr. Balfour a separate letter of identical wording. 

Dr. Koo thought the covering note would of necessity be a brief 
one along the lines Baron Shidehara suggested. The Chinese dele- 
gation had also prepared a note, which was as follows : 

'■ We have the honor to apprise you that the conversations be- 
tween the Chinese and Japanese delegations on the Shantung ques- 
tion which were arranged through the friendly offices of your good 
self and Mr. Balfour have resulted in complete accord, and to in- 
close for jour information a copy of all the agreements and under- 
standings thus reached. 

" In informing you of the successful conclusion of our conversa- 
tions, we beg to express our gratification that the Conference on 
the Limitation of Armament, so happily convoked by the Govern- 
ment of the United States, has afforded an opportunity for the set- 
tlement of this important international question, and to thank you 
for your good offices which have made this opportunity fruitful of 
most felicitous results."' 

He suggested making the communication as soon as possible so 
that it might reach its destination to-morrow morning. 

Baron Shidehara agreed. 

It was agreed that the Japanese and Chinese delegations should 
each communicate to Mr. Hughes and Mr. Balfour, under the respec- 
tive covering notes above given, the agreements, annexes, and un- 
derstandings appearing in the annex. 

Washington, D. C, January 31, 1922. 



SJC-36.] 

Annex. 
AGREEMENTS. 

1. The Former German Leased Territory of Kiaochow. 

1. Japan shall restore to China the former German leased territory 
of Kiaochow. 

2. The Governments of Japan and China shall each appoint a com- 
mission with powers to make and carry out detailed arrangements 
relating to the transfer of the administration and of public property 
in the said territory, and to settle other matters equally requiring 
adjustment. For such purposes the Japanese and Chinese commis- 
sions shall meet immediately upon the coming into force of the pres- 
ent agreement. 

3. The said transfer and adjustment shall be completed rs soon as 
possible, and, in any case, not later than six months from the date of 
the coming into force of this agreement. 

4. The Japanese Government agrees to hand over to the Chinese 
Government, upon the transfer to China of the administration of the 
former German leased territory of Kiaochow, such archives, regis- 
ters, plans, title deeds, and other documents in the possession of 
Japan, or certified copies thereof, as may be necessary for the said 
transfer, as well as those that may be useful for the administration by 
China, after such transfer, of tliat territory and of the 50-kilometer 
zone around Kiaochow Bay. 

2. Public Properties. 

The Government of Japan undertakes to transfer to the Govern- 
ment of China all public properties, including land, buildings, works, 
or establishments m the leased territory of Kiaochow, whether for- 
merly possessed by the German authorities or purchased or con- 
structed by the Japanese authorities during the Japanese administra- 
tion of the said territory, save those indicated in Article (par. 

3) of this treaty. 

In the transfer of such public properties no compensation will be 
claimed from the Government of China, except (1) for those pur- 
chased or constructed by the Japanese authorities, and also (2) for 
the improvements on or additions to those formerly possessed by the 
German authorities. With regard to cases under these two cate- 
gories, the Government of China shall refund a fair and equitable 
proportion of the expenses actually incurred by the Government of 
Japan for such properties (specified in (1) ) or such improvements or 
additions (specified in (2)), having regard to the principle of depre- 
ciation and continuing value. 

It is agreed that such public properties in the leased territory of 
Kiaochow as are required for the Japanese consulate to be established 

(377) 



378 

in Tsingtao shall be retained b}' the Government of Japan, and tliat 
those required more especially for the benefit of the Japanese com- 
munit3\ including public schools, shrines, and cemeteries, shall be 
left in the hands of the said community. 

Details of such matters shall be arranged by the joint commission 
provided for in Article of this treaty. 

3. Japanese Tkoops. 

The Japanese troops, including gendarmes, now stationed along 
the Tsingtao-Tsinanfu Railway and its branches shall be withdrawn 
as soon as the Chinese police or military force shall haA'e been sent 
to take over the protection of the railway. 

The disposition of the Chinese police or military force and the 
withdrawal of the Japanese troops under the foregoing provisions 
may be effected in sections. The date of the completion of such 
process for each section shall be arranged in advance between the 
competent authorities of Japan and China. The entire withdrawal 
of such Japanese troops shall be effected if possible within three 
months, and, in any case, not later than six months from the date 
of the signature of the present agreement. 

The Japanese garrison at Tsingtao shall be completely withdrawn 
simultaneously, if possible, with the transfer of the administration 
of the leased territory of Kiaochow to China, and in any case not 
later than 30 days from the date of such transfer. 

4. The Maritime Customs, 

(1) It is agreed that upon the coming into force of the present 
treaty the custom-house of Tsingtao shall be made an integral part of 
the Chinese maritime customs. 

(2) It is understood that the provisional agreement of August 6, 
1915, between Japan and China relative to the maritime customs 
office of Tsingtao will cease to be effective upon the coming into 
force of the present treaty. 

5. The Tsingtao-Tsinanfu Railway. 

Japan shall transfer to China the Tsingtao-Tsinanfu Railway and 
its branches, together with all the pro^^erties appurtenant thereto, 
including wharves, warehouses, and other similar properties. 

China on her part undertakes to reimburse to Japan the actual 
value of the railway properties mentioned in the preceding para- 
graph. The actual value to be so reimbursed shall consist of the sum 
of 53,406,141 gold marks (which is the assessed value of such por- 
tion of the said properties as was left behind by the Germans), or 
its equivalent, plus the amount which Japan, during her administra- 
tion of the railway, has actually expended for permanent improve- 
ments on or additions to the said properties, less a suitable allow- 
ance for depreciation. It is understood that no charge will be made 
with respect to the wharves, warehouses, and other similar properties 
mentioned in paragraph 1 of this article, except for such permanent 
improvements on or additions to them as may have been made by 



379 

Japan during her administration of the railway, less a suitable 
allowance for depreciation. 

The Government of Japan and the Government of China shall each 
appoint three commissioners to form a joint railway commission, with 
powers to appraise the actual value of the railway properties on the 
basis defined in the preceding paragraph, and to arrange the transfer 
of the said properties. 

Such transfer shall be completed as soon as possible, and, in any 
case, not later than nine months from the date of the coming into 
force of the present agreement. 

To effect the reimbursement under paragraph 2 of this article, 
China shall, simultaneously with the completion of the transfer of 
the railway properties, deliver to Japan Chinese Government treas- 
ury notes, secured on the properties and revenues of the railway, and 
running for a period of 15 years, but redeemable at the option of 
China at the end of 5 years from the date of the delivery of the 
treasury notes, or at any time thereafter upon 6 months' previous 
notice. 

Pending the redemption of the said treasury notes, the Chinese 
Government will select and appoint, for so long a period as the said 
notes remain unredeemed, a Japanese subject to the post of traffic 
manager and another Japanese subject to be chief accountant jointly 
with the Chinese chief accountant with coordinate functions. These 
officials shall all be under the direction, control, and supervision of 
the Chinese managing director, and removable for cause. 

Financial details of a technical character relating to the said 
treasury notes, not provided for in this article, shall be determined 
in mutual accord between the Japanese and Chinese authorities as 
soon as possible and, in any case, not later than six months from the 
date of the coming into force of the present agreement. 

6. The Extensions of the Tsingtag-Tsinanfu Railway. 

It is agreed that the concessions relating to the two extensions of 
the Tsingtao-Tsinanfu Eailway, namely, the Tsinanfu-Shunteh and 
the Kaomi-Hsuchowfu lines, wdll be thrown open for the common 
activity of an international financial group on terms to be arranged 
between the Chinese Government and the said group. 

7. Mines. 

The mines of Tsechuan, Fangtse, and Chinlingchen, for which the 
mining rights w^ere formerly granted by China to Germany, shall 
be handed over to a company to be formed by a special charter of 
ihe Chinese Government, in which the Japanese capital may not 
exceed the amount of the Chinese capital. 

The mode and terms of such arrangement shall be determined by 
the Chinese and Japanese commissions which are to be appointed 
for that purpose and which shall meet immediately upon the coming 
into force of the present agreement. 

8. Opening or the Former German Leased Territory. 

The Japanese Government declares that it has no intention of 
seeking the establishment of an exclusive Japanese settlement or of 
an international settlement in Tsingtao. 



380 

The Chinese Government, on its part, declares that the entire area 
of the former German-leased territory of Kiaochow will be opened 
to foreign trade and that foreigners will be permitted freely to 
reside and to carry on commerce, industry, and other lawful pursuits 
within such area. 

The rested rights lawfully and equitably acquired by foreign 
nationals in said area, whether under the German regime or during 
the Japanese military occupation, will be respected. 

All questions relating to the status or validity of such vested 
rights acquired by Japanese nationals shall be arranged by the Sino- 
Japanese joint commission. 

9. Salt Industry. 

Whereas the salt industry is a Government Uionopoly in China, 
it is agreed that the interests of Japanese companies or Japanese 
nationals actually engaged in the said industry along the coast of 
Kiaochow Bay are to be purchased by the Chinese Government on 
payment of fair compensation and that exportation to Japan of a 
quantity of salt produced by the said industry along the said coast 
is to be permitted on reasonable terms. Arrangements for the above 
purposes, including the transfer of said interests to the Chinese Gov- 
ernment, shall be completed by the Chinese and Japanese commis- 
sions as soon as possible and in any case not later than six months 
from the date of the coming into force of the present agreement. 

10. Submarine Cables. 

Japan declares that all the rights, title, and privileges concerning 
former German submarine cables between Tsingtao and Chefoo and 
between Tsingtao and Shanghai are vested in China, with the ex- 
ception of those portions of the said two cables which have been 
utilized by the Japanese Government for the laying of a cable 
between Tsingtao and k^asebo ; it being understood that the question 
relating to the landing and operation at Tsingtao of the said 
Tsingtao-Sasebo cable shall be arranged by the Chinese and Jap- 
anese commissions, subject to the terms of the sexisting contracts to 
which China is party. 

11. Wireless Stations. 

The Japanese wireless stations at Tsingtao and Tsinanfu shall be 
transferred to China upon the withdrawal of the Japanese troops at 
those two places, respectively, with fair compensation for the value 
of these stations. 

The details of such transfer and compensation shall be arranged by 
the Chinese and Japanese commissions. 



ANNEXES. 
I. Preferential Rights. 

Japan declares that she renounces all preferential rights with re- 
gard to foreign assistance in persons, capital, and material stipulated 
in the Sino-German treaty of March 6, 1898. 



II. Public Enterprises. 

Enterprises relating to electric liglit, telephone, stockyard, etc., 
shall be handed over to the Chinese Government, with the under- 
standing that the stockyard, electric light, and laundry enterprises 
are, in turn, to h? handed over to the municipal government of 
Tsingtao, which will form Chinese corporations in conformity with 
the Chinese company law to manage them under municipal super- 
vision and regulations. 

III. Telephones. 

The Japanese Government agrees to turn over to the Chinese Gov- 
ernment the telephone enterprise in the former German leased terri- 
tory of Kiaochow. -" 

As regards such telephone enterprise, the Chinese Government will 
give due consideration to requests from the foreign community at 
Tsingtao for such extensions and improvements as may be reason- 
ably required by the general interests of the public. 

IV. Public Works. 

The Chinese Government declares that in the management and 
maintenance of the public works in Tsingtao, such as roads, water- 
works, parks, drainage, sanitary equipment, etc., handed over to the 
Chinese Government by the Japanese Government, the foreign com- 
munity in Tsingtao shall have fair representation. 

V. Maritime Customs. 

The Chinese Government declares that it will move the Inspector 
General of the Chinese maritime customs to permit the Japanese 
traders at Tsingtao to communicate with the said customs in the 
Japanese language ; and, in the selection of a suitable staff for the 
Tsingtao customs, to give consideration within the limits of its estab- 
lished service regulations to the diverse needs of the trade of Tsingtao. 

VI. The Tsinotag-Tsinanfu Railway. 

Should the joint railway commission fail to reach an agreement on 
any of the matters intrusted to its charge, the points at issue shall be 
taken up by the two Governments for discussion and adjustment by 
means of diplomacy. 

In the determination of such points the two Governments shall, if 
necessary, obtain recommendations of an expert or experts of a third 
power or powers, who shall be designated in mutual agreement with 
each other. 

VII. Extension or the Tsingtao-Tsinanfu Railway. 

The Japanese Government has no intention of claiming that the 
option for the construction of the Chefoo-Weihsien Railway should 
be thrown open for the common activity of the international finan- 
cial consortium if that railway is to be constructed with Chinese 
capital. 

93042—22 25 



382 

VIII. Opening of the Former Leased Territory. 

The Chinese Government declares that, pending the enactment and 
general application of laws regulating the system of local self-gov- 
ernment in China, the Chinese local authorities Avill ascertain the 
views of the foreign residents in the former German leased terri- 
tory of Kiaochow in such municipal matters as may directly affect 
their welfare and interests. 



UNDEESTANDINGS RECORDED IN THE MINUTES. 

The Tsingtao-Tsinanfu Railway. 

(1) It is understood that, on taking over the railway, the Chinese 
authorities shall have full power and discretion to continue or 
remove the present employees of Japanese nationality in the service 
of the railway, and that reasonable notice may be given before the 
date of transfer of the railway. Detailed arrangements regarding 
the replacements to take effect immediately on the transfer of the 
railway to China are to be made by the Chinese and Japanese au- 
thorities. 

(2) It is understood (1) that the entire subordinate staff of the 
Japanese traffic manager and of the Japanese chief accountant are 
to be appointed by the Chinese managing director; and (2) that 
after two j^ears and a half from the date of the transfer of the rail- 
way, the Chinese Government may appoint an assistant traffic man- 
ager of Chinese nationality for the period of two years and a half, 
and that such assistant Chinese traffic manager may also be appointed 
at any time after six months' notice for the redemption of the treas- 
ur^^ notes is given. 

(3) The Japanese delegation declares that Japan has no intention 
of claiming that China is under any obligation to appoint Japanese 
nationals as members of the said subordinate staff. 

(4) It is understood that the redemption of the said treasury notes 
will not be effected with funds raised from any source other than 
Chinese. 



MEETINGS OF THE DRAFTING COMMITTEE. 



The drafting committee met at the Pan American Union Building 
as follows: 

First meeting^ February ^, 1922^ at 10.30 a. m. 

There were present : 

China. — Dr. Chung- Hui Wang. Accompanied by Mr. T. F. Hsu, 
Mr. C. Chao. 

Japan. — Baron Shidehara. Accompanied by Mr. Kimura, Mr. 
Shiratori, Mr. Saito. 

As observer: 

United States of America. — Mr. Edward Bell. 

Second meeting., February ^, 1922., at 6 y. m. 

There were present : 

China. — Dr. Chung-Hui Wang. Accompanied by Mr. C. Chao. 
Japan. — Baron Shidehara. Accompanied by Mr. Saito, Mr. 
Sawada. 

Third meeting^ February 4, 1922., at 10.30 a. m. 

There were present : 

China. — Dr. Chung-Hui Wang. Accompanied by Mr. T. F. Hsu, 
Mr. C. Chao. 

Japan. — Baron Shidehara. Accompanied by Mr. Kimura, Mr. 
Saito. 

Fourth meeting., Febr'uary 7, 1922., at ^ p. m. 

There were present : 

China. — Dr. Chung-Hui Wang. Accompanied by Mr. T. F. Hsu, 
Mr. C. Zee, Mr. Chuan Chao. 

Japan. — Baron Shidehara. Accompanied by Mr. Kimura, Mr. 
Saito. 

Fifth meeting., February 8, 1922, at 4- p- '^. 

There were present : 

China. — Dr. Chung-Hui Wang. Accompanied by Mr. T. F. Hsu, 
Mr. Chuan Chao. 

Japan. — Baron Shidehara. Accompanied by Mr. Kimura, Mr. 
Saito. 

The text of the treaty, including the annex, was discussed at the 
tirst, second, and third meetings, and definitely agreed to at the 
third meeting. 

The text of the "Agreed terms of understandings recorded in the 
minutes" was discussed at the fourth and fifth meetings and defi- 
nitely agreed to at the fifth meeting. 

(383) 



384 

TREATY FOR THE SETTLEMENT OF OUTSTANDING QUESTIONS 
RELATIVE TO SHANTUNG 



Japan and China, being equally 
animated by a sincere desire to 
settle amicably and in accordance 
with their common interest out- 
standing questions relative to 
Shantung, have resolved to con- 
clude a treaty for the settlement 
of such questions, and have to 
that end named as their Plenipo- 
tentiaries, that is to say : 

His Majesty the Emperor of 
Japan : 

Baron Tomosaburo Kato, 
Minister of the Navy; 

Baron Kijuro Shidehara. 
Ambassador Extraordinary 
and Plenipotentiary ; and 

Masanao Hanihara, Vice- 
Minister for Foreign Af- 
fairs; 
His Excellenc}^ the President 
of the Chinese Republic : 

Sao-Ke Alfred Sze, Envoy 
Extraordinary and Minis- 
ter Plenipotentiary; 

Vilryuin Wellington Koo, 
Envoy Extraordinary and 
Minister Plenipotentiarj' ; 
and 

Chung-Hui Wang, Former 
Minister of Justice; 

Who. having communicated to 
each other their respective full 
powers, found to be in good and 
due form, have agreed upon the 
following Ar|;icles : 

SECTION I. 

RESTORATION OF THE FORMER 
GERMAN LEASED TERRITORY 
OF KIAOCHOW. 

Article I. 

Japan shall restore to China 
the former German Leased Terri- 
tory of Kiaochow. 



Article II. 

The Government of Japan and 
tlie Government of the Chinese 
Republic shall each appoint three 
Commissioners to form a Joint 
Commission, with powers to make 
and carry out detailed arrange- 
ments relating to the transfer of 
the administration of the former 
German Leased Territory of 
Kiaochow and to the transfer of 
public properties in the said Ter- 
ritory and to settle other matters 
likewise requiring adjustment. 

For such purposes, the Joint 
Commission shall meet imme- 
diately upon the coming into 
force of the present Treaty. 

Article III. 

The transfer of the adminis- 
tration of the former German 
Leased Territory of Kiaochow 
and the transfer of public proper- 
ties in the said Territory, as well 
as the adjustment of other mat- 
ters under the preceding Article, 
shall be completed as soon as pos- 
sible, and, in any case, not later 
than six months from the date of 
the coming into force of the pres- 
ent Treaty. 

Article IV. 

The Government of Japan 
undertakes to hand over to the 
Government of the Chinese Re- 
public, upon the transfer to 
China of the administration of 
the former German Leased Terri- 
tory of Kiaochow, such archives, 
registers, plans, title-deeds and 
other documents in the possession 
of Japan, or certified copies 
thereof, as may be necessary for 
the transfer of the administra- 



385 



tion, as well as those that may 
be useful for the subsequent ad- 
ministration by China of the said 
Territory and of the Fifty Kilo- 
metre Zone around Kiaochow 
Bay. 

SECTION II. 

TRANSFER OF PUBLIC PROP- 
ERTIES. 

Article V. 

The Government of Japan 
undertakes to transfer to the Gov- 
ernment of the Chinese Republic 
all public properties including 
land, buildings, works or estab- 
lishments in the former German 
Leased Territory of Kiaochow, 
whether formerly possessed by 
the German authorities, or pur- 
chased or constructed by the Jap- 
anese authorities during the pe- 
riod of the Jaj)anese administra- 
tion of the said Territory, except 
those indicated in Article VII of 
the present Treaty. 

Article VI. 

In the transfer of public prop- 
erties under the preceding Arti- 
cle, no compensation will be 
claimed from the Government of 
the Chinese Republic : Provided, 
however, that for those purchased 
or constructed by the Japanese 
authorities, and also for the im- 
provements on or additions to 
those formerly possessed by the 
German authorities, the Govern- 
ment of the Chinese Republic 
shall refund a fair and equitable 
proportion of the expenses ac- 
tually incurred by the Govern- 
ment of Japan, having regard to 
the principle of depreciation and 
eontinuing value. 



Article VII. 

Such public properties in the 
former German Leased Territory 
of Kiaochow as are required for 
the Japanese Consulate to be es- 
tablished in Tsingtao shall be re- 
tained by the Government of 
Japan, and those required more 
especially for the benefit of the 
Japanese community, including 
public schools, shrines and ceme- 
teries, shall be left in the hands 
of the said community. 

Article VIII. 

Details of the matters referred 
to in the preceding three Articles 
shall be arrangecl by the Joint 
Commission providecl for in Ar- 
ticle II of the present Treaty. 

SECTION III. 

WITHDRAWAL OF JAPANESE 
TROOPS. 

Article IX, 

The Japanese troops, including 
gendarmes, now stationed along- 
the Tsingtao-Tsinanfu Railway 
and its branches, shall be with- 
drawn as soon as the Chinese po- 
lice or military force shall have 
been sent to take over the protec- 
tion of the Railway. 

Article X. 

The disposition of the Chinese 
police or military force and the 
withdrawal of the Japanese 
troops under the preceding Ar- 
ticle may be effected in sections. 

The date of the completion of 
such process for each section shall 
be arranged in advance between 
the competent authorities of Ja- 
pan and China. 



386 



The entire withdrawal of such 
Jai^anese troops shall be effe ted 
within three months, if possible, 
and, in any case, not later than 
six months, from the date of the 
signature of the present Treaty. 

Article XI. 

The eTapanese garrison at 
Tsingtao shall be completely 
Avithdrawn simultaneously, if 
possible, with the transfer to 
China of the administration of 
the former German Leased Terri- 
tory of Kiaochow, and, in any 
case, not later than thirty days 
from the date of such transfer. 

SECTION lY. 

MARITIME CUSTOMS AT TSING- 
TAO. 

Article XII. 

The Custom House of Tsingtao 
shall be made an integral part of 
the Chinese Maritime Customs 
upon the coming into force of the 
present Treaty. 

Article XIII. 

The Provisional Agreement of 
August 6, 1915, betAveen Japan 
and China, relating to the re- 
opening of the Office of the Chi- 
nese Maritime Customs at Tsing- 
tao shall cease to be effecti\'e upon 
the coming into force of the 
present Treaty. 

SECTION V. 

TSINGTAO-TSINANFTJ RAILWAY. 

Article XIV. 

Japan shall transfer to China 
the Tsingtao-Tsinanfu Railway 
and its branches, together with 
all other properties appurtenant 
thereto, including wharves, ware- 



houses and other similar proper- 
ties. 

Article XV. 

China undertakes to reimburse 
to Japan the actual value of all 
the Raihvay properties mentioned 
in the preceding Article, 

The actual A^alue to be so reim- 
bursed shall consist of the sum of 
fifty-three million four hundred 
and six thousand, one hundred 
and forty-one (53,406,141) gold 
Marks (Avhich is the assessed 
value of such portion of the said 
properties as Avas left behind by 
the Germans), or its equivalent^ 
plus the amount which Japan, 
during her administration of the 
Raihvay, has actually expended 
for permanent improA^ements on 
or additions to the said proper- 
ties, less a suitable allowance for 
depreciation. 

It is understood that no charge 
will be made Avith respect to the 
AvharA^es, warehouses and other 
similar properties mentioned in 
the preceding Article, except for 
such permanent impro Axemen ts on 
or additions to them as ma}^ have 
been made by Japan, during her 
administration of the Raihvay, 
less a suitable allowance for de- 
preciation. 

Article XVI. 

The Government of Japan and 
the Government of the Chinese 
Republic shall each appoint three 
Commissioners to form a Joint 
Raihvay Commission, with pow- 
ers to appraise the actual value 
of the Railway properties on the 
basis defined in the preceding 
Article, and to arrange the trans- 
fer of the said properties. 

Article XVII. 

The transfer of all the Railway 
properties under Article XIV of 



387 



tlie present Treaty shall be com- 
pleted as soon as possible, and, 
in any case, not later than nine 
months from the date of the com- 
ing- into force of the present 
Treaty. 

Article XVIII, 

To effect the reimbursement 
under Article XV of the present 
Treaty, China shall deliver to Ja- 
pan simultaneously with the com- 
pletion of the transfer of the 
Railway properties, Chinese Gov- 
ernment Treasur}' Notes, secured 
on the jDroperties and revenues of 
the Raihvay. and running for a 
period of fifteen years, but re- 
deemable, whether in whole or in 
part, at the option of China, at 
the end of five years from the 
date of the delivery of the said 
Treasury Notes, or at an}" time 
thereafter upon six months' pre- 
vious notice. 

Article XIX. 

Pending the redemption of the 
said Treasury Notes under the 
preceding Article, the Govern- 
ment of the Chinese Republic 
Avill select and appoint, for so 
long a period as any part of the 
said Treasury Notes shall remain 
unredeemed, a Japanese subject 
to be Traffic Manager, and an- 
other Japanese subject to be 
Chief Accountant jointly with 
the Chinese Chief Accountant 
and with co-ordinate functions. 

These officials shall all be under 
the direction, control and super- 
vision of the Chinese Managing 
Director, and removable for 



cause. 



Article XX, 



Financial details of a technical 
character relating to the said 



Treasury Notes, not provided for 
in this Section, shall be deter- 
mined in common accord between 
the Japanese and Chinese au- 
thorities as soon as possible, and, 
in any case, not later than six 
months from the date of the com- 
ing into force of the present 
Treaty. 

SECTION VI. 

EXTENSIONS OF THE TSINGTAO- 
TSINANFU RAILWAY. 

Article XXI. 

The concessions relating to the 
two extensions of the Tsingtao- 
Tsinanfu Railway, namely, the 
Tsinanfu-Shunteh and the Kao- 
mi-Hs>uchowfu lines, shall bet 
made open to the common ac- 
tivity of an international finan- 
cial group, on terms to be ar- 
ranged between the Government 
of the Chinese Republic and the 
said group. 

SECTION VII. 

MINES. 
Article XXII, 

The mines of Tsechwan, Fang- 
tze and Chinlingchen, for which 
the mining rights were formerly 
granted by China to Germany, 
shall be handed over to a com- 
pany to be formed under a spe- 
cial charter of the Government 
jof the Chinese Republic, in which 
the amount of Japanese capital 
shall not exceed that of Chinese 
capital. 

The mode and terms of such 
arrangement shall be determined 
by the Joint Commission pro- 
vided for in Article II of the 
present Treaty. 



SECTION VIII. 

OPENING OF THE FORMER GER- 
MAN LEASED TERRITORY OF 
KIAOCHOW. 

Article XXIII. 

The Government of Japan de- 
clares that it will not seek the 
establishment of an exclusive 
Japanese settlement, or of an 
international settlement, in the 
former German Leased Territory 
of Kiaochow. 

The Government of the Chi- 
nese Republic, on its part, de- 
clares that the entire area of the 
former German Leased Terri- 
tory of Kiaochow will be opened 
to foreign trade, and that for- 
ei«?n nationals will be permitted 
freely to reside and to carry on 
commerce, industry and other 
lawful pursuits within such 
area. 

Article XXIV. 

The Government of the Chi- 
nese Republic further declares 
that vested rigrhts lawfully and 
equitably acquired by foreign 
nationals in the former German 
Leased Territory of Kiaochow, 
whether under the German re- 
gime or during the period of 
tlie Japanese administration, will 
be respected. 

All questions relating to the 
status or validity of such vested 
rights acquired by Japanese sub- 
jects or Japanese cempanies shall 
be adjusted by the Joint Com- 
mission provided for in Article 
II of the present Treaty. 

SECTION IX. 

SALT INDUSTRY. 
Article XXV. 

Whereas the salt industry is a 
Government monopoly in China, 



it is agreed that the interests of 
Japanese subjects or Japanese 
companies actually engaged in 
the Siiid industry along the coast 
of Kiaochow Bay shall be pur- 
chased by the Government of the 
(^hinese Republic for fair com- 
pensation, and that the exporta- 
tion to Japan of a quantity of 
salt produced by such industry 
along the said coast is to be per- 
mitted on reasonable terms. 

Arrangements for the above 
purposes, including the transfer 
of the said interests to the Gov- 
ernment of the Chinese Repub- 
lic, shall be made by the Joint 
Commission provided for in iVr- 
ticle II of the present Treaty. 
They shall be completed as soon 
as possible, and, in any case, not 
later than six months from the 
date of the coming into force of 
the present Treaty. 

SECTION X. 

SUBMARINE CABLES. 

Article XXVI. 

The Government of Japan de- 
clares that all the rights, title, and 
privileges concerning the former 
German submarine cables be- 
tween Tsingtao and Chefoo and 
between Tsingtao and Shanghai 
are vested in China, with the ex- 
ception of those portions of the 
said two cables which have been 
utilized by the Government of 
Japan for the laying of a cable 
between Tsingtao and Sasebo; it 
being understood that the ques- 
tion relating to the landing and 
operation at Tsingtao of the said 
Tsingtao-Sasebo cable shall be 
adjusted by the Joint Commis- 
sion provided for in Article II 
of the present Treaty, subject to 
the terms of the existing con- 
tracts to which China is a party. 



389 



SECTION XL 



WIRELESS STATIONS. 
Article XXVII. 

The Government of Japan un- 
dertakes to transfer to the Gov- 
ernment of the Chinese Eepub- 
lic the Japanese wireless stations 
at Tsingtao and Tsinanfu, for 
fair compensation for the value 
of these stations, upon the with- 
drawal of the Japanese troops at 
the said two places, respectively. 

Details of such transfer and 
compensation shall be arranged 
by the Joint Commission pro- 
vided for in Article II of the 
present Treaty. 

[l. s.] T. Kato. 

[l. s.] K. Shidehaea. 

[l. s.] M. Hanihara. 



Article XXVIII. 

The present Treaty (including 
the Annex thereto) shall be rati- 
fied, and the ratifications thereof 
shall be exchanged at Peking as 
soon as possible, and not later 
than four months from the date 
of its signature. 

It shall come into force from 
the date of the exchange of rati- 
fications. 

In witness whereof, the re- 
spective Plenipotentiaries have 
signed the present Treaty in 
duplicate, in the English lan- 
guage, and have affixed thereto 
their seals. 

Done at the City of Washing- 
ton this fourth day of February, 
One Thousand Nine Hundred 
and Twenty-Two. 

Sao-Ke Alfred Sze. [l. s.] 

V. K. Wellingtoist Koo. [l. s.] 
CHUNG-Htn Wang. [l. s.] 



AXXEX. 



RENUNCIATION OF PREFEREN- 
TIAL RIGHTS. 

The Government of Japan de- 
clares that it renounces all pref- 
erential ritrhts with respect to 
forei^rn assistance in persons, cap- 
ital and material stipulated in 
the Treaty of March 6, 1898, be- 
tween China and Germany. 



II. 



TRANSFER OF PUBLIC PROPER- 
TIES. 

It is understood that public 
properties to be transferred to 
the (Tovernment of the Chinese 
Eepublic under Article V of the 
present Treaty include (1) all 
public works, such as roads, 
water-works, parks, drainage and 
sanitary equipment, and {'2) all 
public enterprises such as those 
relatino; to telephone, electric 
liirht. stockyard and laundry. 

The Government of the Chinese 
Eepublic declares that in the 
manafrement and maintenance of 
public works to be so transferred 
to the Government of the Chinese 
Republic, the foreign community 
in the former German Leased 
Territory of Kiaochow shall have 
fair re))resentation. 

The Government of the Chinese 
Eepublic further declares that, 
upon taking over the telephone 
enterprise in tlie former German 
Leased Territory of Kiaochow. it 
will give due consideration to the 
requests from the foreign com- 
munity in the said Territory for 
such extensions and improve- 



ments in the telephone enterprise 
as may be reasonabh^ required by 
the general interests of the public. 
With respect to public enter- 
prises relating to electric light, 
stockyard and laundr^^ the Gov- 
ernment of the Chinese Republic, 
upon taking them over, shall re- 
transfer them to the Chinese mu- 
nicipal authorities of Tsingtao, 
which shall, in turn, cause com- 
mercial companies to be formed 
under Chinese laws for the man- 
agement and working of the said 
enterprises, subject to municipal 
regulation and supervision. 

IIL 

MARITIME CUSTOMS AT TSING- 
TAO. 

The Government of the Chi- 
nese Republic declares that it will 
instruct the Inspe tor General of 
the Chinese ^laritime Customs 
(1) to permit Japanese traders 
in the former German Leased 
Territory of Kiaochow to com- 
municate in the Japanese lan- 
guage Avith the Custom House of 
Tsingtao; and (-2) to give consid- 
eration, within the limits of the 
established service regulations of 
the Chinese Maritime Customs, 
to the diverse needs of the trade 
of Tsingtao, in the selection of 
a suitable staff for the said Cus- 
tom House. 

IV. 

TSINGTAO-TSINANFU RAILWAY. 

Should the Joint Railway Com- 
mission provided for in Article 
XVI of the present Treaty fail 



(390) 



391 



to reach an afjreement on any 
matter within its competence, the 
point or points at issue shall be 
taken up by the Government of 
Japan and the Government of the 
Chinese Kepublic for discussion 
and adjustment by means of di- 
plomacy. 

In the determination of such 
point or points, the Government 
of Japan and the Government of 
the Chinese Republic shall, if 
necessary, obtain recommenda- 
tions of experts of a third Power 
or Powers who shall be desig- 
nated in common accord between 
the two Governments. 



V. 



CHEFOO-WEIHSIEN RAILWAY. 

The Government of Japan will 
not claim that the option for 
financing the Chefoo-Weihsien 



T. Kato. 

K. Shidehara. 

M. Hanihara. 



Eailway should be made open to 
the common activity of the Inter- 
national Financial Consortium, 
provided that the said Railway 
is to be constructed with Chinese 
capital. 

VI. 

OPENING OF THE FORMER GER- 
MAN LEASED TERRITORY OF 
KIAOCHOW. 

The Government of the Chi- 
nese Republic declares that, pend- 
ing the enactment and general ap- 
plication of laws regulating the 
system of local self-government 
in China, the Chinese local au- 
thorities will ascertain the views 
of the foreign residents in the 
former German Leased Territory 
of Kiaochow in such municipal 
matters as may directly affect 
their welfare and interests. 

Sao-Ke Alfred Sze. 
V. K. Wellington Koo. 
Chung-Hui Wang. 



AGREED TEUMS OF UNDERSTANDING RECORDED IN THE MINUTES 
OF THE JAPANESE AND CHINESE DELEGATIONS CONCERNING 
THE CONCLUSION OF THE TREATY FOR THE SETTLEMENT OF 
OUTSTANDING QUESTIONS RELATIVE TO SHANTUNG. 



I. TRANSFER OF PUBLIC PROP- 

ERTIES. 

1. Japanese subjects w'ill be 
permitted, subject to the provi- 
sions of Chinese law, to become 
members or shareholders of any 
of the commercial companies to 
be formed with respect to pub- 
lic enterprises mentioned in Para- 
graph 4 of Annex II of the 
Treaty. 

II. WITHDRAWAL OF JAPANESE 

TROOPS. 

2. After the withdrawal of the 
Japanese troops provided for irr 
Articles IX-XI of the Treaty* 
no Japanese military force of 
any kind will remain in any part 
of Shantung. 

III. TSINGTAO-TSINANFU RAIL- 

WAY. 

3. All light railways con- 
structed by Japan in Shantung 
and all properties appurtenant 
thereto shall be considered as 
part of the properties of the 
Tsingtao-Tsinanfu Eailway. 

4. The telegraph lines along 
the Railway shall also be con- 
sidered as part of the Railway 
properties. 

5. The Chinese authorities, 
upon taking over the Railway, 
shall have full power and discre- 
tion to retain or to remove the 
present employees of Japanese 
nationality in the service of the 
Railway. In replacing such em- 



ployees, reasonable notice shall 
be givyi before the date of the 
transfer of the Railway. De- 
tailed arrangements regarding 
the replacements to take effect 
immediatel}^ on the transfer of 
the Railway are to be made by 
the Joint Railway Commission 
provided for in Article XVI of 
the Treaty. 

f 6. The entire subordinate staff 
of the Japanese Traffic Manager 
and tlie Jajoanese Chief Account- 

! ant of the Railway is to be ap- 

: pointed by the Chinese Managing 

I Director. After two years and 
a half from the date of the trans- 
fer of the Railway, the Chinese 
Government may appoint an As- 
sistant Traffic Alanager of Chi- 
nese nationality for the period of 
two years and a half, and such 
Chinese Assistant Traffic Man- 
ager may likewise be appointed 
at any time upon notice being 
given for the redemption of the 
Treasury Notes under Article 
XVIII of the Treaty. 

j 7. The Chinese Government is 
under no obligation to appoint 
Japanese subjects as members of 

I the subordinate staff above men- 

\tioned. 

8. The redemption of the 
Treasury Notes under Article 
XVIII of the Treaty will not be 
effected with funds raised from 
any source other than Chinese. 

- 9. The Chinese Government 
will ask the Japanese Govern- 
ment for such information as 
may be useful in making the se- 



(392) 



393 



lection of the Japanese Traffic 
Manager and the Japanese Chief 
Accountant of the Railway. 

10. All questions relating to 
the existing contracts or commit- 
ments made by the Japanese au- 
thorities in charge of the Rail- 
Avay shall be settled by the Joint 
Eailway Commission; and, prior 
to the transfer of the Railway, 
the said Japanese authorities will 
not make any new contracts or 
commitments calculated to be 
harmful to the interests of the 
Railway. 

IV. OPENIISTG OF THE PORMEK, 
GERMAN LEASED TERRITORY 
OF KIAOCHOW. 

11. The term " law ful pur- 
suits " used in Article XXIII of 
the Treaty shall not be so con- 
strued as to include agriculture, 
or any enterprise prohibited by 
Chinese law or not permitted to 
foreign nationals under the 
treaties between China and for- 
eign Powers, it being understood 
that this definition shall be with- 
out prejudice to the question of 
the salt industry provided for in 
Article XXV of the Treaty or 
to any question relating to vested 
rights which shall be determined 
in accordance with Article 
XXIV of the Treaty. 

V. POST OFFICES. 

12. All the Japanese Post 
Offices outside of the former Ger- 
man Leased Territory of Kiao- 
chow shall be withdrawn simul- 
taneously with the transfer of 
the Tsingtao-Tsinanfu Railway, 
if such transfer shall take place 
before January 1, 1923, and, in 

Washington, D. C, February 4, 
T. K. 
K. S. 

M. H. 



any case, not later than the said 
date. 

13. All the Japanese Post 
Offices within the former German 
Leased Territory of Kiaochow 
shall be withdrawn simultane- 
ously with the transfer of the ad- 
ministration of the said -Terri- 
tory. 

VI. CLAIMS. 

14. The omission of any refer- 
ence in the Treaty to the ques- 
tion of claims which Chinese citi- 
zens may have against the Japa- 
nese authorities or Japanese sub- 
jects, for the restitution of real 
property in Shangtung or for 
damages to the persons and prop- 
erty of Chinese citizens in Shan- 
tung, shall not prejudice such 
claims. 

15. The Chinese authorities 
shall furnish the Japanese au- 
thorities with a list of such 
claims together with all available 
evidence in support of each claim. 
Justice shall be done through dip- 
lomatic channel as regards the 
claims against the Japanese au- 
thorities, and through ordinary 
judicial procedure as regards the 
claims against Japanese subjects. 
With respect to the latter class of 
claims, the investigation into ac- 
tual facts of each case may, if 
necessary, be conducted by a 
Joint Commission of Japanese 
and Chinese officials, in equal 
number, to be specially desig- 
nated for that purpose. 

16. The Japanese Government 
shall not be held responsible foi' 
any damages which may have 
been directly caused by military 
operations of Japan during the 
late war. 

1922. 



SZE. 

V. K. W. 
C. H. W. 



K. 



INDEX. 



TREATY. 

Section I. Restoration of leased territory : Page. 

Article I 261-276, 377 

Article II. Joint commission i 261, 272-276 

Article III. IVriod of transfer 272,273,275,276 

Article IV. Archives, documents, title deeds, etc 262,263,266-268,272 

Section II. Transfer of public properties : 

Article V 12, 23-39, 41-55, 86, 89, 272. 365-367, 370, 371, 377, 378 

Article VI. Compensation for Japanese additions and improvemeilts_ 24, 

29, 30, 32-38, 41, 367, 370 

Article VII. Japanese retain certain properties 24, 

25, 27, 29, 32, 33, 37. 41, 870 

Article VIII. Joint commission -24, 30, 33, 37, 55, 365, 366, 370 

Section III. Withdrawal of Japanese troops : 

Article IX 210-230, 378" 

Article X. Period for withdrawal and substitution 210-229 

Article XI. Tsingtao garrison 212,213,215.218,219,226-229 

Section IV. Maritime customs at Tsingtao : 

Article XII 12, 16-22. 371, 378 

Article XIII. Provisional agreement of August 6, 1915 22, 23, 372 

Section V. Tsingtao-Tsinahfu Railway : 

Article XIV 2, 8-12, 38, 65-73, 75-208, 333-364, 378, 379 

Joint enterprise 9-17, 

65-73, 79, 82, 92, 95, 98, 99, 115, 116, 120, 139, 166, 174, 177, 192, 196 

Article XV. Reimbursement for : 65-71, 

73. 76-93. 99. 100, 103, 105. 108, 111, 119, 122-126, 
134. 137, 138, 141, 143, 144, 172, 183, 334. 361 

Article XV. German reparation value 67-70, 

76, 77, 80. 84. 85. 88-90, 99, 101-105, 183, 361 

Article XV, Japanese improvements and additions 70, 

71. 76, 77, 79-83, 88-90, 99, 101, 102, 105, 
110-112, 125, 161, 167, 169, 183, 361, 362 

Article XV. Wharves and warehouses 39-42, 

47, 85, 89, 99, 100, 105, 124, 182, 318, 361 

Chinese banks' offer . , 88, 

108, 109, 115, 117, 124, 134. 138-141. 144, 148, 
162-166, 177, 181, 182, 189, 191-193, 197, 204, 207 

Cash payment 91. 97, 108, 114-117, 119, 120. 122-124. 126, 

133-135, 137-141. 144, 157, 160-170, 172-174, 
177-183, 189-195, 197, 198, 200, 204, 206, 207 

Article XVI. Joint railway commission 99, 10.5-108, 110-114, 

162, 165. 166, 16S. 169, 183, 
274. 347, 348, 361, 362 

Article XVII. Period of tranisfer 99-101, 183, 334. 336, 

337. 361, 363. 364 

Article XVIII. Loan 85, 91, 94, 97, 99, 108, 109, 

114-120, 123, 124. 127-131. 133-148. 153. 155-157, 
159. 166, 167, 174-182, 189-200, 203-207. 335 

Article XVIII. Treasury notes 132. 135, 136. 142-145, 148, 153, 

155, 156, 167, 168, 172-174. 179, 182, 183. 189, 101, 
192, 195, 204, 207, 334-337. 348, 357-359. 361-364 

Article XIX. Employment of Japanese experts 120-122, 126, 

127, 131, 136-142. 144, 145, 147-160, 167-170, 

172, 173. 177, 178. 180, 183, 184, 193, 196, 198, 

204, 207. 334, 335, 337-344, 346, 348-357, 362 

Article XX. Adjustment of financial details 362-364 

(394) 



395 

Section VI. Extensions of the Tsingtao-Tsinanfu Railway : Page. 

Article XXI 66, 230-237, 379 

Article XXI. Yentai-Weilisien Railway 230-232 

Art;cle XXI. Consortium 232-237 

Section VII. Mines: 

Article XXII 2. 5, 66, 85, 99, 101, 182, 277-296, 379 

Article XXII. Tsecliuan, Fangtse (coal) 281-283,288,289.292-296 

Article XXII. Cliinlingchen (iron) 281-289,291-296 

Article XXII. Joint enterprise 277-280, 282, 298 

Export of iron 278, 279, 285, 291-293 

Section VIII. Opening of the former German leased territory of Kiaochow : 

Article XXIII 12, 38, 56-63, 238-261, 379, 3S0 

Article XXIII. Foreign participation in administering 245-260 

Article XXIII. Japanese relinquish claim for Japanese or inter- 
national settlement 56, 245, 246, 248, 259, 261 

Article XXIV. Joint commission 57-59, 260, 261 

Opening of cities in Shantung 56, 241-244, 373 

Article XXIV. Vested rights 11, 40, 56-59, 61, 62. 248, 

259-261, 305, 307, 308 

Section IX. Salt : 

Article XXV 8, 40, 59-64, 73-75, 208-210, 274, 305-313. 367, 380 

Article XXV. Compensation for Japanese investment in 64, 73-75, 

208, 306-312 
Article XXV. Export to Japan 40, 59-62, 64, 74, 75, 208-210, 305-309, 312 

Section X. Cables : 

Article XXVI - 54, 264, 297-301, 38() 

Article XXVI. Tsingtao-Sasebo 297-301 

Article XXVI. Existing contracts 55,297-301 

Section XI. Wireless : 

Article XXVII 86, 87, 264, 301K304, 3§0 

Article XXVIII. Ratification and enforcement — Full powers— 330, 331 

,\NNEX. 

I. Renunciation of preferential rights 22,369,-370,380 

II. Transfer of public properties : 

Telephone 24, 47-54, 366, 367, 370. 371, 381 

Electric-light, etc 24, 48-54 

Laundry 51, 53, 54 

Japanese representation in maintenance of public utilities. 24, 

28-30, 38, 43, 44, 46-18, 371, 381 

III. Maritime customs at Tsingtao : 

(1) Permission to communicate with, in Japanese 16-20,381 

(2) Recommendation for appointment of suitable staff— 17, 20-23, 381 

IV. Tsingtao-Tsinanfu Railway : 

Adjustment of diiferences in joint railway commission — Advice 

of neutral experts 105-108, 110-114, 168, 362, 381 

V. Chefoo-Weihsien Railway : 

Not open to consortium if built With Chinese capital— 373,374,381 
VI. Opening of the former German leased territory of Kiaochow: 

Foreign participation in administering 245-261, 382 

AGEEED TERMS OF UNDEKSTANDING. 

I. (1) Transfer of public properties 53 

II. (2) Withdrawal of Japanese troops 229 

III. Tsingtao-Tsinanfu Railway : 

(3) Light railways 320 

(4) Telegraph lines 320 

(5) Replacement of employees 341-348,374.382 

(6) Subordinate staff 349-357,37.5,382 

(6) and (9) Japanese traffic manager and chief accountant— 337-341, 

349-357, 359 

(7) No obligation on China to appoint Japanese on subordinate 

stafe 354-357, 359, 375, 382 

(8) Treasury notes 357,362,363,382 

(9) Japanese advice on selection of experts 337-341 

(10) Existing and new contracts 357,358,374,375 



^. 



396 

Pag^ 
IV. (11) Opening of the former German leased territory of Kiao- 

chow 238,239 

V. Post offices 320,375 

(12) Offices outside leased territory 320 

(13) Offices inside leased territory 320 

VI. Claims 312-330 

(14) Omission from treaty 329 

(15) Chinese list of cases 1 328 

Joint commission '_ 314, 315, 317, 319, 322-329 

(16) Japanese not responsible for war damages 31(>-318, 329 

o 



fj 



